Wing and a Prayer
The ceasefire might be on its last legs after the latest US-Iran sparring match (downed fighter jet vs. sunk mine-laying vessels), but the market couldn’t care less. The fear index has crawled back to rock-bottom levels.
US indices were closed yesterday for Memorial Day, but this morning they’re looking to keep their momentum going. Unlike recent weeks though, the equity market might not be as rock-solid as it seems.
First, even with a quick peace deal, the economy needs time to heal. The Strait of Hormuz won’t fully reopen until early July at best, and production will take months to normalize.
Second, the Fed leadership change caught the market off guard. Warsh’s arrival was supposed to bring rate cuts, but after weeks of inflation data, the hawks have wrestled control from the doves.
My trading plan
Has the game changed?
Too early to call definitively, but the Dow Jones failing to hit monthly Resistance 1 (after breaking its all-time high of 50,900 points and before pulling back) could signal buyers losing their grip.
Yesterday morning’s gap-up at open (classic sign of excess) supports this trend-change thesis. But let’s stay cautious: yesterday wasn’t a normal session since equity markets were closed for Memorial Day.
Given the lack of clear signals as I write this, I’ll take another observation round at market open.
If today’s buying push can’t reach monthly Resistance 1, I’ll favor short trades targeting buyer stop-losses below the 49,152 support level.
Happy trading!
Maxime holds two master’s degrees from the SKEMA Business School and FFBC. As founder and editor-in-chief of NewTrading.fr, he writes daily about financial trading.
Plot twist
History repeats
Point of No Return