Trump TACOs Seem to Be Getting a Bit Stale
Despite another Trump delay following tough talk on Iran, oil and bond action presents significant headwinds.
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A Truth Social post by President Trump indicated that he was delaying an attack on Iran at the request of several Middle East leaders, and that helped the market bounce in the final hour of trading on Monday.
The indices were hovering near the day’s lows, and the news relieved some pressure, but the overall price action remained poor. Many stocks went bidless, and the action confirmed that a shift in market character is taking place.
The Trump delay this time did not receive the same energetic response as prior TACO situations, but it was enough to push breadth slightly better than even. Once again, there were more new lows than new highs, but the indices, except for the Dow Jones Industrial Average, finished in the red.
The biggest negative right now is that oil is hitting new recent highs and bonds are hitting new lows. That is a major macro headwind, and it will be hard to overcome if those obstacles persist.
While there is a clear negative shift in the market’s character, that does not mean things are going to fall apart and go straight down. The impact on any bounces or rallies are unlikely to last long.
The Next Test Comes on Good News
The next big market test will come when there is some positive progress on Iran. It is likely that many folks will be looking to use strength on Iran news as an opportunity to pare back some exposure. Those folks were caught flatfooted by the action on Friday and Monday, and they will be more anxious now to be bailed out by “War is Over” headlines. The Iran situation, along with Nvidia (NVDA) earnings, is likely to see some sell-the-news response, so be careful.
Strategy
My strategy is not to trust upside action to last for long and to stay patient while stocks pull back and develop better technical support. A number of my favored names performed poorly today, but these are names I am looking at in the longer term and will accumulate further as the charts develop. I do not see any rush to do that right now, but if they sink much more and become oversold, they become snap-back candidates.
Stay cautious and protect precious capital. There is no need to rush to buy bargains. These bargains may easily become even better bargains if this shift in market character gains traction.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre was long NVDA.
