The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
It just got ugly
The US/Iran situation worsened and President Trump announced a pending batch of strikes. Markets don’t know what that means and they didn’t take it well. The S&P opened down 30 points clawed into slightly positive territory and then fell down again once the bad news started breaking. The S&P traded around the 7300 level for the afternoon, slipping a bit further into the close. The war-is-worsening trades occurred in other markets as well. Treasury yields climbed. Crude climbed. The Dollar strengthened. Precious metals fell.
Yesterday I assumed that today’s action would have been driven by inflation data. The CPI (+4.2% vs +4.2% est & +3.8% prior) came in on the nose, with a cool surprise here and there under the hood. At the release, markets reacted favorably. Futures climbed and yields fell. However, that party didn’t last long once the US/Iran headlines started up. That situation, which was priced as if peace were already in place a while ago, is almost as bad as ever.
If one were optimistic, this might be a fresh dip for buying. One must assume that a peace deal will show up sometime in the reasonable future however. Considering how many investors already went down that road, there may not be much capital that is willing to try this play again. I don’t know what to make of this at this point. I want to get long and bank on the fact that the US/Iran situation will conclude fairly soon… but who knows. This thing was always supposed to last a couple weeks and yet we’re going on 3 months now. It reminds me of “The Money Pit.”
https://www.youtube.com/watch?v=lJhHjACjJjA
Anyway. The US stock market went from ignoring the US/Iran ugliness to focusing on it. It’s pushed the usual macro catalysts aside and the market just became a one-trick pony for a while. Throw in the fact that the chart is looking banged up and you have some serious downside risk.
The 50-day moving average is 7213. The 100-day and 200-day are 7007 and 6872 respectively. We can certainly expect support as we test those levels but they represent some significant downside from here. And if each level breaks, it’s going to be a fast and painful drop as the break occurs.
Sentiment is in flux. It’s been shaken away from optimism and now it’s approaching pessimism. Maybe a US/Iran resolution swings it back the other way quickly. Maybe we have to witness oversold conditions first. I’m not sure what’s in store but the carefree days for the longs are gone for the foreseeable future.
See you tomorrow.
-Mike
Visdom Market Commentary
IMPORTANT INFORMATION
This is general educational information and market commentary and is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.
All market and economic data herein is as of the date hereof and sourced from Bloomberg unless otherwise stated. The information is subject to change without notice and we have no obligation to update you.
This general market commentary is intended for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The views and opinions expressed constitute the author(s) judgment based on current market conditions, are subject to change without notice, and may differ from those expressed by other employees of Visdom Investment Group LLC ("Visdom") and Visdom. Past performance and any forward-looking statements are not guarantees of future results. It is not possible to invest directly in an index.
We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. Any securities referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by Visdom or by the author(s) in this context. The information presented is not intended to be making value judgments on the preferred outcome of any government decision. This information does not constitute Visdom research, nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Investing involves market risk, including the possible loss of principal. You should speak to your financial advisor before making any investment decisions. Visdom and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.
