I'll Take a Ceasefire Even If I Don't Trust It, Eyeing Intel Breakout, Rally in Sight?

Market_Recon_TSP1_KL

Well... something happened. About all that everyone I am reading overnight can agree on is that the U.S., Iran and Israel have agreed to a two-week ceasefire and that the Strait of Hormuz will reopen to maritime traffic. This passage, during normal times, witnesses the transit of a rough 20% of the world's oil and about a third of the world's fertilizer. This is an undeniably big deal. The announcement of this ceasefire came in the final hours before Pres. Donald Trump's self-imposed deadline had been set to expire.

There are political takes from both sides that seem far-fetched and are probably less than truthful. I have seen headlines blaring that the U.S. blinked and I have seen headlines claiming that Iran blinked. Iranian leadership is claiming that the U.S. has accepted the "principles" of that regime's 10-point plan that had been proposed as a "basis of negotiations."

Pres. Trump posted to his Truth Socal account: "This will be a double-sided CEASEFIRE! The reason for doing so is that we have already met and exceeded all Military objectives and are very far along with a definitive Agreement concerning Longterm PEACE with Iran, and PEACE in the Middle East."

The president then added: "We received a 10-point proposal from Iran and believe it is a workable basis on which to negotiate. Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two-week period will allow the Agreement to be finalized and consummated."

Can Peace Last?

That's the good question. The coming negotiations will begin this Friday in Islamabad, Pakistan. The Strait of Hormuz is open. It appears that Iran and Oman will charge fees or a toll to transit this waterway or at least that's what is being reported by Iran's Tasnim News Agency. The U.S. president has posted that the U.S. will help move traffic through the Strait safely. Taking a positive note, the president wrote, "Big money will be made. Iran can start the reconstruction process. We'll be loading up with supplies of all kinds, and just 'hangin' around' in order to make sure that everything goes well."

Everything beyond the reopening of the Strait appears to still be under negotiation. Much of Iran's 10-point peace plan would appear, logically, to be non-starters for the U.S. to agree to, while the 15-point plan that the U.S. had proposed would appear to be a bitter pill for Iran to mostly agree to. We do know that Iranian forces have continued to attack the UAE, Qatar, Bahrain, Kuwait and Israel since the ceasefire was announced. We do know that the U.S. is still moving naval assets to the forces already in the region. This feels like a very tentative ceasefire where there is little trust on either side.

My Take?

It would seem that there's no way to morph the U.S.' 15-point plan into the Iranian 10-point plan or vice-versa. The plans are incompatible. The increased U.S. naval presence implies that Iran remains under serious threat should the regime in place not negotiate in good faith. This could just be a break in the fighting, unless Iran agrees to hand over all of its enriched uranium and agrees to dismantle its capacities for the building and development of ballistic missiles and military drones.

Then again, it would appear that Iranian forces still believe they are at war and are behaving confrontationally. This could be a function of broken communications between the leadership in Iran and the military. This could also be a function of the military no longer recognizing the regime as legitimate. Don't get me wrong. I'll take the truce. I think the whole world will. I just don't know if we can trust anything right now.

Market Reaction

Financial markets are responding very well to the prospects for a peace deal and more specifically, the possibility that global shipping routes will reopen smoothly. Asian stock markets are up between 3% to 5% on Wednesday morning. European equities are opening and U.S. equity index futures are trading sharply higher as well. As I work on this early morning piece, WTI Crude is trading a rough 16% lower, bearing a $94 handle after having traded with a $116 handle on Tuesday.

I see natural gas trading more than 5% lower and gasoline down about 10%. I also see Treasury debt securities roaring back to life as the prospects for higher levels of consumer level inflation over the next few months fade. The U.S. Ten-Year Note pays just 4.23% on Wednesday morning after having paid as much as 4.37% on Tuesday. The Two-Year note yields 3.73% as I write this article, down from 3.88% on Tuesday.

Quotes of the Day

"If you want to make peace with your enemy, you have to work with your enemy. Then he becomes your partner."

- Nelson Mandela

"Seize the day and put the least possible trust in tomorrow."

- Horace

Deceptively Positive Economic News

On Tuesday, the Census Bureau released its data for durable goods orders for February. While the headline print showed a month-over-month contraction of 1.4% vs. expectations for something like -0.5%, the numbers improve greatly once certain items are excluded. Ex-transportation orders showed an increase of 0.8% vs. a consensus for 0.5% growth.

Even better, core capital goods orders for the month of February grew 0.6% from -0.4% in January, and better than the 0.3% growth that had been expected. Core capital goods are a proxy for business investment and a far better barometer for the pace of economic activity than is the headline number that includes items like aircraft and fleets of vehicles. If these numbers are to be trusted, then corporate America and Main Street are in better shape than many have been led to believe.

The S&P 500

At the moment (zero dark-thirty on Wednesday morning), futures markets are showing an opening level for the S&P 500 above 6,650. That would be a 2.6% pop from Tuesday night's levels and would take the index above its 200-day (most important) and get in range of the 50-day (still important) simple moving averages. This would put an end to the four-day pause that had been stuck at the S&P 500's 21-day exponential moving average where the index incredibly gave up no ground.

What happens is this. The index holds at least the 200-day line (red) and a day of confirmation of bullish trend hits the tape on increased trading volumes. This will force portfolio managers to increase exposure to U.S. equities on the long side, and they will have the approval of their respective risk managers. Is this guaranteed? You know better than to ask that question. There is still a ton of headline risk.

That said, as someone who has held more senior positions on Wall Street than almost anyone else I know, these managers will expand their holdings if that red line and that blue line are taken. Then the ones who held back will chase the market if those lines are held. There will be a spike. There could be a parabolic rally should Friday's peace talks go well. Then there would be a short squeeze that would have to be sold, but we're not there yet. First, we need everyone to play ball. Then we need everyone to stop shooting at each other.

Potential Breakout...

Intel (INTC) appears set to break out this morning from a basing period of consolidation bearing a $54 pivot created by a January peak.

The base found support from January into late March at the 38.2% Fibonacci retracement level of the August 2025 through January 2026 rally. Both relative strength and the daily moving average convergence divergence are set up at the moment to support any rally technically. I would have no problem putting a $65 target price on INTC.

Economics

(All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.57%.

07:00 - MBA Mortgage Applications (Weekly): Last -10.4% w/w.

10:30 - Oil Inventories (Weekly): Last +5.451M.

10:30 - Gasoline Stocks (Weekly): Last -585K.

1:00 p.m. - Ten-Year Note Auction: $39B.

The Fed

(All Times Eastern)

2:00 - FOMC Minutes.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: (DAL) (.60), (RPM) (.35)

After the Close: (STZ) (1.71)

At the time of publication, Guilfoyle had no position in any security mentioned.