Be Cautious – Major Fund Losses On $21 Oil Head Fake On Tanker Fiasco, Iran's Ace In The Hole, Inline CPI

Mining Strait Of Hormuz

Please click here for an enlarged chart of crude oil futures (NYMEX: CLK24).

Note the following:

• The chart shows a $21 oil head fake.
• The chart shows about a $12 drop in oil on reports of a tanker successfully crossing the Strait of Hormuz.  Later, Energy Secretary Chris Wright confirmed in a post on X that the U.S. Navy had successfully escorted a tanker through the Strait of Hormuz.
• Many funds aggressively short sold oil on Wright's post.  Afterall, who is a more credible source than the Energy Secretary of the U.S.?
• The chart shows when the post was deleted.
• The chart shows about a $9 subsequent rise in oil.
• Funds that shorted oil on Wright's post were forced to cover and suffered major losses.
• It turned out that the U.S. Navy had not escorted any tanker through the Strait of Hormuz.
• The incident shows that investors need to be very careful at this time with any information, even from normally reliable sources.
• Investors also need to be extremely cautious about great trades that many gurus are touting on mainstream media to showcase their success.  A careful examination of the trading data shows that many such trades could not have occurred and are fictitious.  While the media gets the views and gurus get the business, investors who act on such information become bag holders.
• The chart shows another drop in oil when the International Energy Agency (IEA) proposed 400M barrels of oil to be released from reserves.  This will be the largest oil release ever.
• In our analysis, markets are oblivious to an important nuance.  Prudent investors should pay attention.  400M barrels is a large number but oil can flow through these reserves only at a certain maximum rate.  The flow rate may become a limitation and thus may not fully compensate for the oil that is not flowing through the Strait of Hormuz.  
• In our analysis, the consequence of flow rate limitations may be oil prices staying higher longer than the markets expect at this time.  
• We shared with you before the war started that Iran had maximum leverage because it could block the Strait of Hormuz.  Now that Iran has refused to end the war, prudent investors should pay attention to Iran's ace in the hole.  Iran's ace in the hole is mining the Strait of Hormuz.  Conventional mines cost only a few thousand dollars, but it costs millions to sweep each one of them.
• The U.S. Navy is capable of sweeping these mines.  However, there are unconfirmed reports that Iran has more modern mines that are difficult to sweep.
• There are reports that Iran has already started laying mines.  The U.S. has responded by destroying 16 Iranian mine laying vessels.
• In our analysis, these mines are easy to lay, and Iran has thousands of vessels and underwater drones that can lay these mines.
• The severity of the situation is underscored by President Trump publicly warning Iran with severe consequences if Iran mined the Strait of Hormuz and calling for any mines laid to be removed.
• In our analysis, Iran's defiance and ace in the hole are making it difficult for the war to come to a quick end.  Herein lies the risk for investors.
• Consumer Price Index (CPI) came inline.  Here are the details:
  • Headline CPI came at 0.3% vs. 0.3% consensus.
  • Core CPI came at 0.2% vs. 0.2% consensus.
• In our analysis, prudent investors need to keep in mind that the just released CPI data does not reflect the rise in gas prices due to the Iran war.  The next CPI reading will likely be higher.  The stock market is not prepared for a higher CPI.  If the war is prolonged, inflation will become a problem for the stock market.  

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 Tesla Inc (NASDAQ:TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corp (NASDAQ:MSFT), and NVIDIA Corp (NASDAQ:NVDA).

In the early trade, money flows are negative in Alphabet Inc Class C (NASDAQ:GOOG), Apple Inc (NASDAQ:AAPL), and Meta Platforms Inc (NASDAQ:META).

In the early trade, money flows are like a yoyo in SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: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 like a yoyo in gold in the early trade, and this is reflected in gold ETF (GLD), silver ETF (SLV), SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust Series 1 (NASDAQ:QQQ).

Oil

API crude inventories came at a draw of 1.7M barrels vs. a consensus of a build of 1.4M barrels.

Bitcoin

Bitcoin (CRYPTO: BTC) is range bound.

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.