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“Anything worth doing is worth overdoing.” – Mick Jagger

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Traders are looking to turn a new page on the market with the start of the new week as futures trade higher after last week’s declines. The S&P 500 is indicated to open up 0.80% while the Nasdaq is up 1.3%. The driver for the gains is a 5%+ drop in crude oil prices as the US has paused strikes against Iran over the weekend. Treasury yields are also lower in response, while gold, silver, and Bitcoin rally fractionally. Iran will continue to be a catalyst for the market this week, but there are also several other catalysts to watch as a third of the S&P 500 will report earnings and the Fed announces its latest policy decision on Wednesday.

Asian stocks started the week off in rebound mode with most major averages up 1% or more for the session. The main headline out of the region was the IPO of Chinese memory chip maker CXMT, which rallied 465% in its debut and became China’s most valuable listed company after just a day of trading. Perfectly normal, right? Despite that big news in the memory market, South Korean stocks, which have become a bellwether for the sector, only traded up 1%.

In Europe, stocks are also in rally mode to start the last week of July. The STOXX 600 is up just under 1%, as Germany (1.6%) and Spain (1.5%) lead the gains. Germany’s ifo Business Climate Index bounced more than expected to a level of 86.6 from 85.7 in June.

The only economic data on the calendar today is Durable Goods, which came in weaker than expected, and the Dallas Fed report at 10:30.

With oil prices down sharply this morning as equity prices rally, today would be just the sixth time since the launch of the US Oil Fund ETF (USO) in mid-2006 that it gapped down more than 5% while the Nasdaq 100 ETF (QQQ) gapped up more than 1%. As uncommon as these occurrences have been, three of them would have occurred since mid-March! The other three remaining occurrences were in September 2008, April 2020, and March 2022, all of which were periods of extreme market volatility.

With respect to USO, the first occurrence came shortly after the ETF’s record high, from which point prices trended lower for more than a decade. Ironically, the next occurrence came right near the exact low during the Covid crash, and then the next occurrence after that was followed by a near four-year period of sideways trading.

For the Nasdaq, the first came just as the worst of the Financial Crisis began to unfold. The next was just a month after the COVID lows, and the third came early in the Russia-Ukraine war.

With the President pausing attacks on Iran late last week, you have to wonder if he has been dabbling a bit in market technicals, perhaps maybe even getting the Chartered Market Technician designation, Looking at the charts of the Nasdaq and crude oil, the timing of the pause came right as both hit important junctures.

Starting with the Nasdaq, since the June peak, it has been steadily trending lower with lower highs and lower lows. The index closed last week right on the edge of breaking down below that trend of lower lows, and a break of those levels this week would darken the technical picture for the index.

Similarly, for crude oil prices, after erasing all the Iran war gains heading into the July 4th weekend, this month’s re-intensification took WTI right back above $90 last week, testing the downtrend off the spring highs. But news over the weekend ended up making the first upside test of that downtrend line unsuccessful. So, at which point will hostilities pick back up again? A break below the 200-DMA at around $75 when markets start to get comfortable again?

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