To gain an edge, this is what you need to know today.
Bloodshed
Please click here for a chart of SPDR S&P 500 ETF Trust (ARCA:SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
- Over 1300 people have been killed in Israel and Gaza. The bloodshed has broad implications for investors.
- The chart shows that last week after touching the 200 day moving average market ran up to the top band of the prior top support zone. The top support zone is now resistance.
- Before the market ran up, the headline of Morning Capsule read: ‘BLOWOUT JOBS REPORT BUT EXPECT THE MOMO CROWD TO TRY TO RUN UP THE MARKET ON HOURLY EARNINGS.’ The momo crowd was focused on hourly earnings coming in at 0.2% vs 0.3% consensus. Momo crowd completely ignored that nonfarm payrolls came in at 336K vs 158K consensus.
- In The Arora Report analysis, the Fed is not going to ignore the big rise in payrolls.
- The chart shows that the market has pulled back to the bottom band of the top support zone on bloodshed in the Middle East.
- The stock market is assuming that the conflict in the Middle East will be contained to Gaza.
- Prudent investors need to think about what happens to the stock market if there is a wider conflict.
- In The Arora Report analysis, there is a high probability that the attack on Israel was masterminded by Iranians. Further it is almost 100% that the attack would have not been possible without support from Iran. Here is the key question, “Will Israel and the United States ignore Iran or will they go after Iran?” The answer depends in part on what happens with Hezbollah in Lebanon. If Iran wants to escalate, Hezbollah will likely open a second front against Israel in northern Israel.
- In The Arora Report analysis, Iran is extremely important, because the Strait of Hormuz is a choke point. The Strait of Hormuz is the only sea route from the Persian Gulf to the ocean. At its narrowest, the Strait is only 21 nautical miles wide.
- 17M barrels per day of oil travels through the Strait of Hormuz.
- In The Arora Report analysis, Iran is capable of blocking the Strait of Hormuz.
- In The Arora Report analysis, if Iran were to block the Strait of Hormuz, oil would jump to over $300 per barrel. As a reference, West Texas Intermediate Crude (CL_F) is trading at $86.12 as of this writing. The oil is rising about 4%.
- In The Arora Report analysis, Hamas attack has ...