Let's Get Down to Business

Despite a contentious first day of the apparent ceasefire between Iran and the U.S., equities and oil markets are pricing in smooth sailing...at least for the time being. We just had the Fed Minutes released not too long ago, which appeared to be on the hawkish side. As a result, the TLT rally from earlier in the session is in danger of fading to red as we speak into the final hour of trading. 

In addition, the next two mornings will feature some significant macroeconomic data, the likes of which have been cast aside of late thanks to the Iran headlines dominating every tick of the market and every overnight machination in the futures for weeks now. 

However, with the PCE and GDP data points tomorrow morning followed by the CPI inflation print on Friday, I am looking for the market to get down to business with respect to the macro. A stagflationary economy remains my base case, with future Fed rate hikes on the table. 

And that may be, in part, why you are seeing the software names in the IGV ETF (daily chart, first below) fade to red this afternoon after a 50-day moving average test. You are talking about a chart in a clear, steep downtrend, with several of its underlying holdings up sharply today. And, yet, the ETF is red and cannot even hold a respectable oversold bounce into a monstrous overnight squeeze higher in risk. Needless to say I view this as bearish per se. 

On the other side of the tape, oil is getting walloped. My sense is that the ceasefire news trapped many a levered long speculator in the front month futures for crude, causing this brutal dump which seems like an overreaction. 

Hence, seeing an oil services play like Transocean, second daily chart, below, hold up remarkably well is likely a tell that the oil selling is more of a mechanical selloff than symbolizing the end of supply issues for the underlying commodity. Again, RIG is heavily-shorted and probably should have been down 10% on a day like today.