Palantir Pops, President Talks Peace, S&P Swings 'Inverted Hammer'

Market_Recon_TSP1_KL

It happened ahead of the opening bell on Monday morning. Pres. Donald Trump posted to his Truth Social account, mentioning that there had been contact with someone representing the Iranian government and for two days had held productive talks working toward an end to the hostilities in the region. As the U.S. president played up the possibility of peace and perhaps a diplomatic conclusion to the U.S. / Israeli war with Iran, and postponed a threatened attack on Iranian energy infrastructure targets, global markets showed some relief.

The Stoxx Europe 600, which had been down more than 2%, managed to close in the green. U.S. equity index futures had all been down rather sharply ahead of the opening bells in New York. Even after surrendering early morning gains, the Nasdaq Composite tacked on 1.38%, while the S&P 500 gained 1.15%. The small- and mid-cap indexes outperformed, all gaining between 1.92% and 2.29%. In fact, all of the mid-major to major U.S. equity indexes that I follow closed not just in the green, but up at least a full percentage point.

U.S. Treasuries rallied as well, though not as aggressively as one might have thought or hoped. Crude prices did fall sharply on Monday. Front-month WTI Crude dropped from more than $101 per barrel early on Monday morning to less than $86 per barrel at its nadir. I now see the sweet stuff trading with a $90 handle. Brent Crude is trading with a $101 handle through the wee hours on Tuesday morning after ranging between $114 and $97 per barrel on Monday.

Nuts & Bolts

Throughout this now nearly one-month old war, Pres. Trump has gone back and forth between signaling that the hostilities were nearing an end and threatening to take the offensive to a new level. The U.S. has postured Marine Corps infantry in the area on amphibious craft as an overt threat that boots might be put on the ground as elements of the U.S. Army's 82nd Airborne Division are also said to be in the area. The use of amphibious shock troops in conjunction with airborne shock troops, while potentially costly, would be the way to secure energy infrastructure sights without destroying existing facilities.

On Monday, U.S. Special Envoy to the Middle East Steve Witkoff and the president's son-in-law, Jared Kushner. were said to be in contact with "senior" Iranian officials, while other Iranian officials denied that meetings were ongoing. Of course, the primary aim of any deal between the warring parties would be the reopening of the Strait of Hormuz and a ceasefire by Iranian forces against Iran's neighbors. Pres. Trump has said that any deal would include joint control of the strait with Iran. This would not likely be acceptable to hardline Iranian leaders. That said, there does seem to be a rising civilian (non-clerical) leadership in the nation that understands the dire situation that nation is now in.

Enter Pakistan

Pakistan, the peacemaker? It appears so. The Financial Times among others, has reported that Pakistani Army chief Asim Munir has been talking to the Trump administration while Pakistani Prime Minister Muhammad Shehbaz Sharif held talks with Iranian Pres. Masoud Pezeshkian on Sunday and Monday.

Pakistani leadership is apparently pitching Islamabad as a location for U.S. and Iranian leaders to meet, potentially as early as this week. There has been no mention of whether or not Israel would be included in any negotiations. Leaders from both Turkey and Egypt are also said to be talking to Iranian, Pakistani and U.S. officials.

Thoughts?

Despite what the Iranian government or what is left of it is saying publicly, there are almost certainly some kinds of negotiations going on. That does not mean that a peace deal is imminent, nor does it mean that trade routes will normalize any time soon. This will likely be a volatile week for financial markets. It was clear on Monday that even though there was a relief rally, it was tempered and there was some overt caution evident.

Overnight, Iran launched missile and drone attacks against Israel, Saudi Arabia, Kuwait and Bahrain, which tempered that cautious optimism exhibited by investors on Monday. The Saudi government reportedly has informed the U.S. that it was ready to strike Iran if its own power and water plants are hit. Interestingly, after balking at first, at least 21 navies have now offered to support the U.S. Navy's efforts to reopen the Strait of Hormuz.

Quote From Aurelius

"Adapt yourself to the things among which your lot has been cast and love sincerely the fellow creatures with whom destiny has ordained that you shall live."

- Marcus Aurelius (121-180), Emperor of Rome from 161-180.

Quote From Winters

“Anticipate problems and prepare to overcome obstacles. Don’t wait until you get to the top of the ridge and then make up your mind.”

- Major Dick Winters (1918-2011), 101st Airborne from 1941-1946 and 1950-1952.

Marketplace

While Monday's rally did cool off quite a bit as the session wore on, it was still plenty energetic when looked at on the whole. All 11 S&P sector SPDR ETFs closed out the day in the green, led by the discretionaries (XLY) and the materials (XLB) as cyclicals led growth and growth led the defensives. That's a bullish way for the market to have lined up and is bullish for the economy as well.

Winners beat losers by a 17-to-four margin at the NYSE and by about 11-to-four at the Nasdaq. Advancing volume took a commanding 78.8% share of composite NYSE-listed trade and a nearly as impressive 74.7% share of composite Nasdaq-listed activity. Now, this is where things get tricky. Friday was a triple-witching event. Obviously, aggregate trading volumes were lower on Monday versus Friday.

Aggregate trade on Monday, however, was up 16.4% across NYSE-listings from Thursday and up 8.4% from Thursday across Nasdaq-listings. Monday was basically a "Day One" reversal of the bearish trend. Does it count as such? Good question.

The Chart

Readers will see what is known as an "inverted hammer" doji for Monday for the S&P 500. While it looks like a reversal of trend and may be just that, it is clear that the index was rejected at its 200-day simple moving average, meaning professional money not only took short-term profits for the session at that level, but also refused to "jump on the bandwagon" there, which is what was needed.

Relative strength remains "relatively weak," while the daily moving average convergence divergence remains set up quite bearishly. That said, the inverted hammer is indeed a bullish pattern despite the rejection at higher prices as it appears at the bottom of a bearish trend and can define the bottom or a bottom of a recent range.

While there are no guarantees, this was the first time in two weeks that buyers challenged sellers in good volume. We can't call Monday a true day one, because of Friday, but it may have been a pretty good facsimile of one.

All Hail Palantir!

Shares of Palantir Technologies (PLTR) popped for a 6.7% gain on Monday after Reuters reported that the Pentagon will use Palantir's Maven AI-infused system for weapons targeting as its core military artificial intelligence platform.

Once the DoD (or is it DoW?) designates Maven as a program of record, that will streamline Palantir's deals across all branches of the U.S. armed forces and will likely fund Palantir for the long-term with future contracts to be handled and coordinated by the Army. Maven will be moved to the Pentagon's Chief Digital AI Office, most likely within a month's time.

Maven, for those unaware, is a command-and-control software system that uses data from satellites, drones, and sensors into a single user-friendly interface. This interface provides battlefield analysis to senior leaders in theater and sharply improves the military's ability to identify emerging threats.

Readers will see that PLTR has developed a cup with handle pattern bearing a $161 pivot. That is where the stock met resistance on Monday. PLTR's 200-day simple moving average stands at $163, so this is a crucial area for the stock that will either put an end to that potential rally for the name or provide rocket fuel for "blast-off." I am reiterating my $194 target price.

Economics

(All Times Eastern)

08:15 - ADP Employment Change (weekly): Last 9K.

08:30 - Non-Farm Productivity (Q4-rev): Flashed 2.8% q/q, SAAR.

08:30 - Unit Labor Costs (Q4-rev): Flashed 2.8% q/q, SAAR.

08:55 - Redbook (Weekly): Last 6.4% y/y.

09:45 - S&P Global Manufacturing PMI (Mar-Flash): Expecting 50.2. Last 51.6.

09:45 - S&P Global Services PMI (Mar-Flash): Expecting 50.4. Last 51.7.

10:00 - Richmond Fed Manufacturing Index (March): Expecting -5, Last -10.

4:30 p.m. - API Oil Inventories (Weekly): Last +6.6M.

The Fed

(All Times Eastern)

6:30 - Speaker: Reserve Board Gov. Michael Barr.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: SFD (.67), AAR (1.16)

After the Close: (KBH) (.54)

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