Markets have entered classic risk-off territory after news came out about the Israeli attack on Iran.
I write this on Friday afternoon so you will know more than me about what is going on by the time you read this.
Early reports are pointing to an attack on the Iranian nuclear program as well as an attack on a meeting in Iraq between various Iranian backed groups and the IRGC (Islamic Revolutionary Guard Corps).
This increases the risk that things could spiral out of control, so it is no wonder Mr market is running for cover.
Oil, bonds and gold are rallying, and stocks are falling.
Making predictions about the future path of geopolitical events like this is a fool’s errand.
The highest probability is that things will settle down again after a period of volatility.
The technical situation in US stocks was ripe for a correction so this news could be a catalyst that sets off some stop losses and leads to a sharp fall.
In today’s Closing Bell video I show you the target where I think the S&P 500 is heading to in the short-term.
I then give you a few different scenarios to consider.
Gold is flying higher on the news and should remain well supported while the situation remains volatile, but after such a strong run we should be prepared for a sharp correction if things settle down.
The oil price will let us know how seriously the world takes the current tit-for-tat going on between Israel and Iran. As I have been saying, if Brent crude oil heads above US$96 a barrel I have a target above US$110. This would cause some problems for stocks as they become worried about sticky inflation.
Click on the picture above to check out my latest Closing Bell video where I analyse the S&P 500, US bonds, gold, and the ASX 200 now that the correction is gathering steam.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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