Market Runs Over Trump Skeptics as Oil Move Puts Powell on the Defensive

After the market closed on Monday, Israel said it had agreed to a cease-fire with Iran, bringing an end to 12 days of bombing. A few hostilities continued after the deadline, but it appears that the deal is in place and that both sides are abiding by the agreement at this point.

Markets around the world are trading higher, but the biggest and most important move is in crude oil, which continues to move lower. Oil is one of the most significant drivers of inflationary pressures, and the drop will have a significant impact on Fed policy.

This drop in oil occurs at the same time as Fed Chair Powell is scheduled to appear before Congress for two days of testimony. Powell will appear before the House on Tuesday morning and will be aggressively questioned about his reluctance to cut interest rates. This sharp drop in oil will make it even tougher on Powell and his argument that there is still too much risk of an uptick in inflation. President Trump is certain to be aggressive in his continued criticism of the Fed Chair.

Critics and doubters of Trump's economic and foreign policy continue to drive equities higher as they try not to be run over by a market that is becoming even more technically extended. The bears that questioned Trump's trade policies have been on the wrong side of the action for many weeks and now those that predicted that Iran would suck the U.S. into a mess appear to be on the wrong side of the action once again.

Ironically, the more extended the market becomes, the greater the underlying support. There is a legion of underinvested bulls and bears that want to put more cash to work but don't want to chase a straight-up move. They will be inclined to buy very shallow pullbacks and will keep the indexes sticky to the upside.

Markets like this one tend to stay sticky to the upside since there is such a large group of folks that are poorly positioned and struggling to adjust their holdings. While the bears are focused on overbought technical conditions, there is great fear that the market is not going to pull back very much, and those that are underinvested will be left behind once more.

My game plan is to focus on the charts of individual stocks with good fundamentals and to try to find some lower-risk entry points. It's been too easy to take profits too quickly, and it is very tough to put substantial capital to work. I want to be selective with my buying, but I want to have more exposure to good charts.

At the time of publication, Rev Shark had no positions in any securities mentioned.