The Best of War and More

Reports of a United States Navy drone being shot down by an Iranian missile over the Strait of Hormuz in what government officials are calling an "unprovoked attack," certainly is affecting crude oil and most energy stocks this morning, as they are spiking higher virtually across the board. 

But as far as any jitters reverberating through equities as a whole, it appears the controlling factors for this rally remain that the Fed's Powell did his part yesterday to not be too hawkish or come off as strident in his tone and tenor with respect to monetary policy going forward.

In addition, the "pain trade" in equities figured to have been higher, a working thesis we discussed with Members dating back to last week, as many market players likely threw in the towel, albeit temporarily, after a demoralizing month of May for bulls. We also know that plenty of institutional players were under-invested and are now likely in the tough position for being forced to chase this rally higher during what is normally the summer doldrums, not to mention June historically being one of the rougher months for stocks. 

Thus, with this morning's gap higher on the major indices, it would seem that we are enjoying the "best of war and more," to borrow a famous album title. 

However, with the small cap and Nasdaq ETFs both gapping up through their respective upper daily chart Bollinger Bands, I wanted to use the morning strength to lock in some hard-fought gains in a variety of longs as well as cut a laggard in ESPR which simply did not wake up. To be sure, I remain constructive on the market, and am also intrigued by the extreme strength we are suddenly seeing in precious metals and miners.

But, for now, I am moving towards the short-term view that discretion is the better part of valor, war or not.