The Market Is Hit With a TACO and Likes It
Here's the most important chart in the market right now.
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US-POLITICS-TRUMP-CABINET
Markets were under heavy pressure again on Monday morning with all major indexes deeply negative for the year. Even gold, after a tremendous run, had given back its gains. It looked pretty grim until the market was hit with a TACO. TACO stands for Trump Always Chickens Out.
The immediate focus was on a deadline set by President Trump on Saturday evening. Trump posted on Truth Social that Iran had 48 hours to "fully open, without threat" the Strait of Hormuz or the U.S. would "hit and obliterate their various power plants, starting with the biggest one first."
Monday morning Trump announced he is postponing any attacks on Iran, which is providing some relief. The TACO trade is alive and well.
Iran had responded by threatening to close the Strait indefinitely and target energy infrastructure across the region if Trump followed through. Asian markets reflected the overnight anxiety with South Korea's Kospi down 6.5%, Japan's Nikkei off 3.5%, and Hong Kong's Hang Seng losing more than 3.5%. The IEA issued a statement calling the current energy crisis worse than the oil shocks of the 1970s.
That gloom lifted suddenly when Trump announce that bombing will stop for five days and there are ongoing negotiations.
The TACO Trade Is Alive
Trump posted a threatening ultimatum and this morning he backed off. Whether you call it flexible diplomacy or something less charitable, the pattern is consistent. When markets send a sufficiently negative message and pressure builds from enough directions, Trump pulls back. We saw it repeatedly last year with tariffs.
Gas prices at $3.94 a gallon nationally, indexes negative for the year, and Asian markets in freefall overnight provided exactly that pressure. The postponement announcement this morning is the TACO trade executing in real time.
The Most Important Chart in the Market
The most pressing issue for the market right now is not the headline number on the S&P 500. It is bonds. The iShares 20+ Year Treasury Bond ETF (TLT) has become the chart that matters most because it is where inflation and growth concerns are being priced most directly.
Bonds are struggling with the growing uncertainty about where inflation is headed and what it means for growth. No one knows how long the oil disruption persists but the bond market is sending a clear signal that the outcome is unlikely to be favorable.
If TLT loses its current support level the whole market is likely to follow lower. That is the level worth watching most closely today.
Game Plan
The advice has not changed. Do not try to predict a market low. Building a case for where the bottom might be is a distraction from the more productive work of preparation. It will take time for the market to find a bottom, build support, and establish a new uptrend. There will be sharp counter-trend bounces along the way that attract short-term traders. For anyone with a longer time frame those moves are largely noise.
Maintain a good shopping list, stay patient, and stay alert. The time to buy will come and when it does the opportunities will be significant.
Related: How to Time the Stock Market With Your Own Portfolio
At the time of publication, Rev Shark had no positions in any securities mentioned.
