April 15, 2024
Good morning,
With Futures up ~0.6% in premarket trading this morning, it seems increasingly clear that Friday’s reversal in most asset trends (stocks sold off / bond yields declined) represented broad market risk reduction ahead of the widely-discussed Iranian attack. With the attack over, a partial snap-back of Friday’s outsized moves may be this week’s first market move. However, a full resumption of the underlying direction and rate of travel for stocks and bonds seems unlikely for two reasons. The obvious one is that while the attack is over, the odds of further escalation in the region have increased. Markets will have to carry a higher geo-risk premium now. The second less obvious reason is that over the past few weeks of higher volatility and overall choppiness, the number of negative short-term technical signals has grown to be enough to warn of a consolidation (down 0-5%) or a correction (down >-5%).
Prospects for a recovery from a consolidation or correction are still high due to longer term technical signal health.
Be well,
Mike
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