Oil Price Spikes as U.S. Grows Frustrated With Tension in Iran

Better-than-expected inflation news and progress on a trade deal with China failed to rally the market on Wednesday. Equities saw early strength, and dip buyers showed up on the first pullback, but the bulls were unable to generate sustained momentum.

A midday report that some evacuations are taking place in the Middle East spiked oil higher and accelerated the selling of stocks. The U.S. is growing frustrated with the lack of progress with Iran and is likely indicating that it is ready to take more drastic measures if things don’t change.

The inability of the market to perform on the positive news is a warning sign. It is an indication that the market has already discounted these positives, and there aren’t many buyers left to pour more cash into the market. Breadth was negative, but there were more than 650 new 12-month highs.

Another warning sign is the pockets of speculative action. There were big moves in nuclear-relative stocks, quantum computers and some lenders like SoFi Technologies SOFI. Traders are gravitating to higher-risk stocks as they chase performance in a market that is not allowing easy entries in lower-risk names.

There is a PPI report due Thursday, which will be of interest, and the Michigan Sentiment Survey is due out on Friday. However, it is potential trade news that is keeping the bears from becoming more aggressive. There is still much concern about sticky inflation and weakening growth, but the headline risk of positive trade news is what is preventing the bears from becoming more aggressive.

We are at a very tricky juncture in the market, but the high level of pessimism and uncertainty is what is helping the most to hold the indices near highs.

Have a good evening. I’ll see you tomorrow.

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