NFTRH; Market Knee Jerk Playbook: US-Iran Edition

I checked the futures this morning only to see broad stocks down after yesterday’s ‘China stimulus’ party. I saw copper down but oil up and there was gold (and to a much lesser degree, silver), ramping up as well. Hmmm… strange. What could be up with these mixed messages? Well of course, it’s the old geopolitical tensions play (US-Iran).

Now I suppose anything can happen but please be aware that today is today; a knee jerk reaction by man and machine in the opposite direction they’ve been going where stocks are concerned. As for gold, it’s been going up and that is being furthered. But the point is that today is today and these flash points, whether they be due to a trade war or tensions about a conventional war (or terror, pestilence, etc.) most often do not last in their effects.

US Stocks & Global Stocks

Already in a high risk vs. reward stance for weeks now as we’ve been noting; especially US stocks. If I am a bear I am not shorting into this situation unless I am a day trader bear and think I can skim a few points and be super nimble. I am not that. Personally, I plan to use the balance with precious metals stocks and cash to advantage and make moves as I would have, without the political flashpoint input.

The stock market is and has been overbought, over loved… and bull trending. A trend is the final word until it is compromised. Frankly, I am surprised the stock market is not down more than it is, given the pin prick potential of this negative news item.

Bottom line is that I don’t see a status change beyond the next few days on this situation. The market has been two things, risky and bullish. That has not changed.


Gold is up well in pre-market and silver, less so. That sounds about right in a risk ‘off’ lurch. The herds are also piling into Treasury bonds. Again, if history is our guide – and it is – this will ultimately not shake out well for gold if/as casino patrons find what always seems to be the inevitable relief from whatever negative flashpoint has driven stocks down and gold up.

Gold’s technical situation has been a breakout of consolidation with the objective a test of the 2019 high or even a new high. The US-Iran situation could put that in the books, but if and when it cools down be aware that gold normally takes a hit because the wrong kind of investors pile in during these situations. As it is, I think gold has been getting too many inflationists and now it is getting geopolitical investment refugees. The bullishness will probably wear off when political relief ensues and that could mean a significant negative reaction in gold out ahead. Again, I am only reporting what normally is the case in situations like this.

Crude Oil

It’s different than gold because it stands to be fundamentally affected by the political situation. But let’s recall the spike from 54 to 64 in WTI back in September. It was driven up on a fundamental market situation as well (pardon me, I don’t remember what it was) and was soon on its way to test the lows before it finally bottomed.

We have noted that oil’s seasonal pattern bottomed in December and I would not be so quick to call this an ill-fated jump in the oil price as I would for gold, when taking the situation at face value.

Bottom Line

There’s always a first time, but these situations that drive markets hard in one direction or another tend have efficacy measured in days, not weeks or months, and they do not change trends. So this weekend NFTRH 584 will proceed as it would have, factoring this situation but we should not alter the main themes until flashpoints are played out and trends are either affirmed or compromised.