The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Iran again
Yields climbed materially across the curve and early trading was negative for stocks. The S&P opened down about 10 points but fell to around down 50 within an hour. A slight recovery was undone by news that the US Treasury Department revoked a waiver which allowed the sale of Iranian oil. The IRGC fired missiles at commercial ships in the Strait of Hormuz earlier in the day. The Treasury announcement sent the usual war-is-worsening trades into motion. Stocks went down, yields went up, crude went up, precious metals fell, the Dollar strengthened. Aside from the US/Iran headlines, other news was unremarkable.
And here we go again. Markets aren’t reacting extremely to this latest hiccup in the US/Iran situation but they are still reacting. The usual question presents itself, is this a dip to buy or is this just the start of a dip to buy?
Today doesn’t alter the chart of the S&P materially and so the prior interpretations remain valid. The long term trend is bullish. The medium term trend is bullish. The short term trend is bullish. It’s going to take a much bigger shock, or a radical turn in sentiment, to change the look of the chart. This suggests that chart-watchers will support the tape sometime soon.
The fundamental picture too, remains intact. This IRCG incident is a momentary risk-off event, as far as markets are currently concerned. A significant escalation of attacks, especially on commerce, will be required to alter the path of the global economy.
So considering that the technical and fundamental pictures of the bullish market are unaltered, it’s a good bet to predict the usual dip-buyers will come to the usual rescue. Will they come tomorrow or in a couple of days?
They don’t tend to wait very long but they also haven’t been rushing into the breech while headlines are negative. I think they need a period of calm, even if just for a day… or better yet a constructive headline, for the dip-buyers to push prices with vigor.
I guess it’s possible that the dip-buyers are out of capital but I doubt that. I expect a recovery right away.
See you tomorrow.
-Mike
Visdom Market Commentary
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