The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Moving on?
The bulls got their turn today. Futures traded slightly higher with a bit of chop in the premarket but certainly didn’t flash all-clear signs to investors. The market opened about +20, dipped to flat, then re-rallied to the +50-+70 range for the bulk of the day. Treasury yields climbed again, supposedly because of the inflation risks linked to the elevated crude prices. The Mag 7 essentially led the way higher for the broader market.
A bounce was expected. Perhaps the surprise today was that a bounce happened so quickly, one day after a selloff. The Iran headlines continue but shocking ones are absent. The relative calm of the news cycle helped the market steady its nerves and re-embrace risk. Our resulting question becomes whether today’s bounce was *the* bounce or just a bounce?
Chart-watchers are going to claim we just bottomed and new highs are en route. I don’t disagree. The S&P has been range-bound since October, with an ever-narrowing band. The technicians believe that a large breakout should follow, with the direction still TBD. However, we can speculate that an upside breakout is probably more likely.
Global events will have to cooperate of course. The US and Israel will need to continue to dominate the Iranian battlefield. Boots on the ground will have to remain a rhetorical weapon and not a plausible outcome. The Straits of Hormuz will need to be protected, with land-based threats effectively neutralized, and *most importantly* tankers will need to resume travel through it.
Markets need to observe these events, or believe that they are imminent, to pursue a large risk-on move.
Maybe we get some small rallies as we wait and things look better but I think the big upside scramble requires an open Straits of Hormuz.
See you tomorrow.
-Mike
Visdom Market Commentary
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