During Tuesday evening in the States on the East Coast, Iran launches a missile strike against two US-Iraq military bases housing troops. Futures markets are slapped in the face as Iran makes good on its threats for retaliation against the United States for the killing of General Soleimani (who was a dirtbag terrorist). Iran proclaims, "The revenge operation has begun!" A shooting war begins. The ballistic missiles are serious weapons traveling about 200 miles; it shows that Iran does have strong firepower. Iran has a strong and capable army and military. Iran's intent is obviously to cause some damage and take lives if possible.
The attacks occur at 1:30 AM to 2:00 AM local Iranian time early Wednesday morning which is between 5:30 PM EST and 6:00 PM EST Tuesday evening just before futures are open for trading. Boom. S&P futures collapse 51 points. Dow futures plummet 420 points. The Nasdaq futures drop 152. Gold catapults higher above 1600 to 1606. Silver 18.70. Copper -0.9%. West Texas crude oil jumps +4.4%. Japan's NIKK and Topix indexes are each down -2.5%. KOSPI (South Korea) -1.2%. ASX200 (Australia) -0.9%. Euro 1.1163. Dollar/yen 107.71 a 107-handle as the yen is bot as a safe haven. US Treasury yields are; 2-year 1.46%, 5-year 1.51%, 10-year 1.72%, 30-year 2.21%. The 2-10 spread is 25.3 bips.
A butterfly flaps its wings. The drone assassination of Soleimani leads to a three-day funeral procession in Iran where 25 people die and over 600 are injured from trampling. It is always interesting to see peoples from many different lands embark on pilgrimages where folks end up trampled to death at the bottle-necks. The Iran retaliation places Iraq in the middle of the US-Iran tit-for-tat. President Trump said he would respond to any Iran attack. The markets are worried that an American may have been killed but the initial news reports only mention property damage. This will relieve markets since a death would be a dramatic escalation.
At 7:41 PM EST Tuesday evening, 1/7/20, S&P -53. Dow -440. Nazzy -172.
At 8:07 PM EST Tuesday evening, 1/7/20, S&P -39. Dow -320. Nasdaq -126. Iran proclaims, "We have fired on US troops."
At 8:33 PM EST Tuesday evening, 1/7/20, S&P -43. Dow -353. Nasdaq -137. Gold 1602. Silver is up +2% to 18.77. WTIC oil spikes +3.5% to 64.88. Brent oil is up +3.6% to 70.74 above the 70 level again. US Treasury yields are; 2-year 1.48%, 5-year 1.53%, 10-year 1.73%, 30-year 2.23%.
Overnight US time, the news wires say no Americans are killed but this is still being verified. The Pentagon or State Department has not verified this as yet. President Trump, while sitting on the toilet getting ready for bed, tweets, "All is fine" but in the same tweet says they are still assessing damage and determining if anyone was killed or injured (how does Trump know all is fine then?). Comically, it's all BS all the time from all politicians. How do you tell a politician is lying? His lips are moving.
US futures recover strongly since the Iran strike may even the score while it did not do much harm. The situation will depend on if King Donny wants to strike back again. Iran is boasting to its people that they bit back at the big bad United States. S&P futures recover to down only -6. Dow -125. Nazzy -31. Gold 1591. Silver 18.60. Copper +0.2%. Dollar/yen 108.41. US Treasury yields are; 2-year 1.51%, 5-year 1.58%, 10-year 1.78%, 30-year 2.26%. The 2-10 spread is 27 bips. Asian markets recover and remain down but not at the lows.
At 2:47 AM EST today, Wednesday morning US time, 1/8/20, S&P -5. Dow -103. Nasdaq -26. Gold 1588. Silver 18.56. European indexes are set to open in a few minutes and are set to move -0.5% lower or more.
After the European open, Iran proclaims that they have given a crushing response against the US. It looks like Iran is hoping that the missile strikes will be enough retaliation to make the citizenry happy. Boom. A Boeing 737 goes down in Iran killing all 180 people on board. Traders wonder if an errant missile shot the plane down. News reports say it may have been a technical issue unrelated to the Iran missile strike against the US-Iraq bases. S&P -5. Dow -110. Nazzy -27. Russell -3. Volatility shoots higher with the VIX at 14.666. In early trading, BA stock tumbles -2.6%.
At 5:08 AM EST, S&P -3. Dow -83. Nasdaq -14. Russell -2. VIX 14.72. The stock market is ready for more upside partying since the Federal Reserve and other central bankers will keep printing easy money. Traders scoff and laugh at missile fire only viewing it as a stock buying opportunity. Iraq says Iran told them ahead of time about the missile strike targets. Thus, Iraq would have told the US, so there should be no casualties, and Iran's retaliation was a little baby strike. If that is what it takes for the Arabs to feel good, then that is good.
US Treasury yields are; 2-year 1.53%, 5-year 1.60%, 10-year 1.80%, 30-year 2.28%. The 2-10 spread is 27 bips. OIl is up a paltry +0.3%. Gold is at 1584 but over 20 bucks off the overnight high. Silver 18.48. Copper +0.1%.
Comically, the big over 50-point loss in the S&P futures overnight vaporizes into nothing. The complacency in the US stock market is at record-setting levels, and the mild Iran retaliation strike may keep the euphoric party high going in the stock market perhaps for another day or few. The US-Iran-Iraq Crisis is deescalating.
There are several things going on with the SPX daily chart above. The blue lines show a head and shouldlers (H&S) pattern developing. The right shoulder just formed so watch to see if price falls down through the neckline at 3215. The head is at 3258 so that is a difference of 43 points, thus, if 3215 fails, price will seek 3172 which is a gap-fill area. The blue circles show gaps below that will need filled at some point forward.
Note how price gapped-up in mid-December from 3204 to 3215. If price comes down to 3215, and then immediately drops through a trap-door to 3204 and moves lower, that would be an island reversal pattern. The SPX is currently sitting on an island above 3215. The alternate path is simply for the SPX to come down and fill that 3204-3215 gap.
The thick brown lines show a cup and handle (C&H) with the cup bottom at 3080 and brim at 3150. Thus, 3220 is the upside target if price breaks up above 3150, which it did, and the target price occurs, thus satisfying the pattern. The red lines show the negative divergence spank down that occurred off the top but now price is in a sideways chop on the ongoing Iran drama. The indicators are moving sideways not hinting at what may come next.
The purple box for the ADX shows that the rally higher in December was a strong trend higher, however, that petered out as the new year began. The ADX is down to 19 showing that the upside rally in stocks is no longer a strong trend higher. Price keeps moving through that standard deviation tunnel respecting the upper and lower bands.
Note the M, or W, price pattern across the top with the potential blue H&S forming. This is interesting. Bring up the SH daily chart which is the short ETF against the S&P 500. A W pattern bottom is one of the most powerful stock patterns. If the W shape forms below the 50 or 200-day MA's (look at the daily chart not the 2-hour) it is an even more powerful pattern. If the W pattern bottom forms under both the 50 and 200-day MA's (like the SH is now), it is an uber powerful upside pattern in the making. This tells you that SH has a very strong path higher in its future which means the stock market will move lower. The stock market complacency is off the charts wanting to see a market selloff for the last month but the Fed's ongoing money pump is still too powerful. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 5:56 AM EST: S&P +7. Dow +4 (lagging because of BA). Nasdaq +19. Russell +3. VIX 14.09. The market has to kiss itself its so pretty. Sing Hallelujah for the Uptown Funk non-stop rally. Party-on! Fill my cup Fed, put some easy money liquor in it. This stuff is hilarious. The boat is fully loaded to the one side with the band playing long into the night. The good times will never end. Whheeee. Whoopie!
Note Added 7:12 AM EST: S&P +7. Dow -17. BA -1.9%. Nasdaq +14. Russell +4. VIX 14.10. Iranian officials say they do not plan to hand over the black boxes from the airplane crash to Boeing. Perhaps a missile may have clipped the plane? No one cares. They were not one of the 180 souls sitting on that fateful plane and besides, they are all too busy buying stocks. For now, the party continues. Hump day is another pump day.
Note Added 12:05 PM EST: President Trump speaks on the US-Iran-Iraq Crisis proclaiming that Iran will never have a nuclear weapon. King Donny uses his slow monotone voice he saves for serious occasions--he is an actor on stage. Lots of military men, no women, with medals on their chests, stand behind the president supporting him; they probably call themselves the Testosterone Ten. Trump does not want to further escalate the matter but he announces more sanctions against Iran escalating the matter. The president is trying to strong-arm Iran back to the negotiating table. He says, "Iran is standing down." Trump emasculates Iran which is not good since that breeds lifetime hatred. Comically, in the stock market, after Iran fires missiles at US airbases in Iraq, now a shooting war from country to country, and the smell of WW III in the air, the SPX prints a new all-time record high above 3259. The S&P 500 gains 22 points and over +0.7%. VIX slips below 13 printing a 12 handle at 12.98. The reversal in the futures and stock market is astounding. S&P futures fell over 50 points and then recovered 70 points in only 18 hours; a huge 120-point path. The H&S pattern is blown out of the water; the new high could serve as a head for a future H&S. Gold gives up 50 bucks dropping back down to 1560. Silver 18.21. WTIC oil is down -4.1% a huge turnaround in the oil patch. Brent oil is down -3.4%. AAPL prints a new record high. The future is so bright you have to wear shades. The stock market goes straight vertical after President Trump speaks.
Note Added 12:12 PM EST: SPX 3256.66. VIX 13.2666. US Treasury yields are; 2-year 1.5666%, 5-year 1.65%, 10-year 1.85%, 30-year 2.33%. The 2-10 spread is 27.666 bips. The turnaround in yields is stunning. The 10-year yield is reversing by about 16 basis points today a remarkable move.
Note Added 4:00 PM EST: Going into the closing bell, Iran fires rockets into the Green Zone in Baghdad. No reports on casualties as yet. Stocks collapse giving up about one-half the day's gains. Iran is likely not happy that Trump is painting them as little b*tches. The Whitehouse says that Iran was purposely trying to miss targets with the missile attack. Middle East countries only respect force but at the same time, emasculating, ridiculing and demeaning your opponent is not good; that is how you breed an enemy for generations. Iran will continue attacking US interests for years to come. The State Department is saying that Iran definitely did intend to kill Americans with their missile attack refuting Trump that is emasculating Iran (the old military guys are trying to employ a steady hand). The SPX finishes up 16 points, +0.5%, to 3253.05, not a new all-time closing high, but a new record high at 3267.07. The bulls are unstoppable. Uncle Fed plans on greasing the skids through next week and Cousin PBOC is throwing big bucks into the pot each week by constantly cutting the triple R's. The world is awash in liquidity. Pick some up, cash is laying on the ground all over the place, and buy stocks, bonds and real estate. Buy some artwork for your house and don't forget to pay the bloated asking price. Go out and buy that antique car you always wanted; the money is easy these days. The money is so easy go out and buy some stupid stuff like a boat that you will tire of in a year or two or fancy expensive clothes that will be out of style next month. Life is good in the land of never-ending central banker accomodation. Everyone agrees that nothing can go wrong and we live in a perfect society now.
Note Added 7:00 PM EST: S&P futures are joyous up a couple. Dow +9. Nazzy +8. Russell +1. The move in yields is remarkable. US Treasury yields are; 2-year 1.58%, 5-year 1.666%, 10-year 1.87%, 30-year 2.36%. The 2-10 spread is 28.5 bips. WTIC oil goes sub 60 to the 59.95 palindrome. Brent oil is down to 65.44 after it spiked above 70. Gold 1557. Silver 18.15. Copper flat. Euro 1.1113. The strikes on the Green Zone do not result in any casualties. Dollar/yen is at 109.03 printing a 109-handle the yen weakening as everyone is gun-ho risk-on buying stocks with reckless abandon, drinking Fed wine and celebrating each day of life where stocks will always go up and never go down. Market participants now guarantee that it is effortless to make money in the stock market and stocks will never sell off ever again. Irving Fisher speaks from the grave and says this time he really does believe that the stock market is at a permanently high plateau. The wine is flowing like water.
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