Investors Sell the News as Uncertainty Roars Back After Trump's Speech

Donald Trump

Investors spent two days celebrating a sizable rally triggered by President Trump's comments that the Iran situation would end soon and oil prices would quickly fall. There was high hope that the corrective action had ended and that steady improvement was ahead.

Those hopes were dashed as we are seeing a classic "sell-the-news" reaction to President Trump's Wednesday night speech.

The Speech Changed Nothing

A prime-time speech by President Trump was a perfect opportunity to clarify the time frame and outline next steps in the U.S.-Iran conflict. That didn't happen. Instead, he outlined the justification for the war, cited the success achieved so far, and reiterated it would soon come to an end.

There was nothing new. What will happen and how long it will take remain uncertain. Even worse, Trump warned that if Iran does not agree to a deal soon, he will destroy Iranian infrastructure. That threat sent oil prices straight up. WTI crude is trading near $99 a barrel Thursday morning, with Brent at $103.

The Setup Was Already There

The technical conditions for a sell-the-news reaction were already in place. The lack of concrete plans and the creation of greater uncertainty guaranteed that investors would head for the exits once again.

This is exactly why we didn't rush to proclaim a market bottom after Tuesday's big move. That move needed confirmation before we could have greater confidence in a trend change, and we are not getting it. The bottoming process will take more time and require greater patience.

How Deep Does This Go

The critical question now is how deep this selling will go. Key support sits at the S&P 500 closing low of 6343 hit on Monday. If those levels are tested, it will be painful. Even if we don't sink that far, the likelihood of positive follow-through next week is greatly diminished.

New developments are possible, but they seem unlikely, especially given the potential for strikes on Iranian infrastructure that could send oil prices even higher.

My Game Plan

I mentioned Wednesday that I had been making quite a few partial sales to have greater flexibility. The market action Thursday morning is exactly why I did that.

I will not be in any rush to buy this drop. I may make a few small buys if some of the drops appear too severe, but I am going to wait for strength before I do much. We need to see if some support will form. There is no immediate catalyst that is likely to attract buyers.

Keep in mind that we have a long weekend ahead with the market closed for Good Friday tomorrow. It is unlikely that investors want more exposure to the risk of what could occur over a three-day period. The chances of a substantial bounce Thursday are low given the news flow.

At the time of publication, Rev Shark had no positions in any securities mentioned.