Wall Street Wrong About Supreme Court Torpedo – Smart Money Sold the Rally – State of Union Address And Uncertainty Ahead

Our Contrary Call

Please click here for an enlarged chart of Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Note the following:

The chart shows a rally in tech stocks when the Supreme Court decision came out striking President Trump's tariffs.
The Interim Capsule provided by us after the Supreme Court decision now seems prescient. We wrote:

The Supreme Court has ruled against the Trump tariffs saying the president does not have the authority to impose tariffs under IEEPA. The stock market has staged a vigorous rally in response. In our analysis, the stock market response is short sighted for the following reasons:

President Trump has several other options to impose tariffs.

Tariffs are bringing in substantial revenue. Without tariffs, there will be a higher deficit and more debt.

The Supreme Court decision reduces the leverage President Trump has to negotiate with other countries.

Corporations will seek refunds of tariffs paid, exacerbating the budget deficit.

Of note is that at a time when Wall Street was issuing calls to buy stocks and the momo crowd was aggressively buying stocks, we did not issue a buy signal for U.S. stocks and did not lower our proprietary protection band.

The chart shows smart money sold the rally as the day progressed.

As we predicted, President Trump later imposed 15% tariffs under Section 122 of the Trade Act of 1974.

The chart shows that during the bulk of the rally, with the exception of late day short covering, our proprietary VUD indicator was orange, indicating a net supply of stocks in spite of aggressive momo crowd buying. The orange represents net supply and the green represents net demand.

The chart shows the drop in the early trade today in tech stocks as the stock market reacts to 15% tariffs.

The chart shows the tariff line. Investors should carefully watch to see if tech stocks stay above this line or if they break below. If tech stocks stay above the tariff line, it will indicate that the momo crowd is temporarily winning.

In our analysis, Wall Street is wrong. Wall Street buying is based on the following:

Reduced uncertainty

Lower inflation

Lower interest rates

Better relationships with other countries

Higher earnings for companies

Company earnings juiced by tariff refunds

In a contrary call, our analysis shows the following after the Supreme Court's decision:

Higher uncertainty

Higher interest rates

Weaker dollar

Higher budget deficit

Higher national debt

U.S. losing leverage in geopolitics

Tariff refunds delayed by years

In our analysis, Wall Street is ignoring three elephants in the room:

Tariffs were paying for about 70% of the recent tax cut. Without tariffs, the budget deficit will go higher.

Tariffs were helping to rebuild the manufacturing base in America. Without tariffs, the hollowing out of the American industrial base will continue.

The Supreme Court decision is a gift to China and Russia.

President Trump will deliver his State of the Union address tomorrow at 9pm ET. The State of the Union address will likely be market moving.

In our analysis, tariff uncertainty is good for gold, silver, and many international markets such as India, Japan, and Vietnam. As full disclosure, our portfolio contains iShares MSCI Japan ETF (NYSE:EWJ), WisdomTree India Earnings Fund (NYSE:EPI), and VanEck Vietnam ETF (BATS:VNM).

Magnificent Seven Money Flows

Most portfolios are now heavily concentrated in the Mag 7 stocks. For this reason, it is important to pay attention to early money flows in the Mag 7 stocks on a daily basis.

In the early trade, money flows are positive in Alphabet Inc Class C (NASDAQ:GOOG) and NVIDIA Corp (NASDAQ:NVDA).

In the early trade, money flows are negative in Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), Meta Platforms Inc (NASDAQ:META), Tesla Inc (NASDAQ:TSLA), and Apple Inc (NASDAQ:AAPL).

In the early trade, money flows are negative in SPDR S&P 500 ETF Trust (NYSE:SPY) and Nasdaq 100 ETF (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ. Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil. The most popular ETF for gold is SPDR Gold Trust (NYSE:GLD). The most popular ETF for silver is iShares Silver Trust (NYSE:SLV). The most popular ETF for oil is United States Oil ETF (NYSE:USO).

Gold

The momo crowd is aggressively buying gold in the early trade and is especially aggressive in gold ETF (GLD), silver ETF (SLV), VanEck Gold Miners ETF (NYSE:GDX), and Global X Silver Miners ETF (NYSE:SIL). Smart money is inactive in the early trade.

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound. Bitcoin bulls are disappointed that tariff uncertainty is not causing a run up in bitcoin. Afterall, investors were sold the idea of bitcoin being a hedge against uncertainty.

What To Do Now

Consider continuing to hold good, very long term, existing positions and add tactical positions based on signals.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.