Revolution Means a Celestial Object That Comes Full Circle

You might well say that the entire Iran/U.S. relationship has come full cycle since the Jimmy Carter years, as President Carter had on his watch the 1979 Iranian Revolution and the subsequent 444-day hostage crisis. There is no telling, despite the (mostly) optimistic rhetoric from current President Trump, just how long this particular conflict lasts. 

But just as we saw in the (early) 1970s with the Arab oil embargo the deleterious effects of supply disruption typically come after the initial shock and awe of the headlines abates. Thus, even if a true deal is ironed out, something still very much in limbo, I still maintain the hangover from this entire episode will be the real issue for markets and the economy: Oil, chemicals, fertilizer, all rolled into one big inflation shock. 

Bulls are countering that today's tape is rejecting that notion, as stocks are attempting another hopeful rally while oil's morning rally ran into trouble on headlines of Israel/Lebanon peace talks. 

Be that as it may, even if you dismiss the software carnage as being an outlier (IGV is down 4.5% as I write this), the Magnificent 7 ETF, below on the daily chart, remains firmly below its 200-day moving average. One would think would the recent relief rally that the Mag7 would be ripe for some easy upside gains. 

However, as you can see the MAGS ETF is still lingering below that yellow line. In effect, all MAGS has done so far is retrace the losses back up to March 18th. Considering the sheer market cap size of the Mag7 constituents, this seems like another red flag regarding the current rally as being some type of meaningful bottom.

Tomorrow morning we have the CPI print, with year-over-year estimates at 3.4%. I would not be shocked to see a hotter number than that, which means The Fed is behind the curve (surprise!) regarding rate hikes, despite the White House pining for cuts.