The Decisive Day: The Market Just Called a Bombing Good News.
All week the worry was simple: the SpaceX IPO was draining cash out of stocks, inflation was creeping, and the Iran ceasefire looked fragile. Today every one of those threads comes to a head at once, and Fear and Greed sits at 28, deep in the Fear zone, almost unchanged from yesterday. The crowd is braced. The catalysts underneath, though, are quietly turning the other way.
Start with the war, because it is the strangest part. The ceasefire did not just wobble, it broke hard. The US fired 49 Tomahawks at Iran, including two dams, Iran struck the US Fifth Fleet in Bahrain, and the War Secretary is threatening a second night of strikes. On paper that is a market nightmare. Instead the market rose, because the violence produced something nothing else had: the first ever direct phone call between Tehran and the White House, mid-bombardment, and with it the start of real peace talks. A signed agreement is now expected around the Summer Solstice on June 21. The market read escalation as the fastest road to peace.
The second thread resolves today too. The SpaceX IPO finally lands this Friday, and the frozen cash that has been pulled out of stocks all week, reportedly four times the normal amount, gets released back into the market. The drain that pressured prices for days is about to become a flood. So the two forces that weighed on the market for weeks, the war and the IPO cash squeeze, both flip on the same day.
The warning is that the real overhang is not the war, it is the rate clock. Wholesale inflation just jumped, with PPI hitting 6.5 percent, its highest in over three years, and traders did not blink on their rate-hike bets. That, not Iran, is what can cap a rally. And IPO first days are a casino: violent swings, fit for day trading only, where retail investors who chase the open get trapped holding long. A Fear reading of 28 tells you the crowd has not yet caught up to catalysts that are improving.
Watch whether the released cash and the peace turn can overpower a fearful crowd today, or whether that 6.5 percent inflation print quietly keeps the lid on.
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About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.
About the Author
Daniel Yue has been an active investor since 1980, with experience spanning stocks, currencies, futures, metals, and bonds. A scholar of the Chicago School of Economics, he holds a Certificate with Distinction from Cambridge University and a degree in International Trading from National Taiwan University. He served as Chief Analyst for over 30 years and Chief Mentor at Sincere Finance. In 2017, he received an award from the University of Arizona for financial internship leadership.
The analysis and opinions expressed in this article are for educational purposes only and do not constitute financial advice. Investing involves risk. Please consult a qualified financial advisor before making investment decisions.