Since the US and Iran signed the ceasefire memorandum, news of renewed armed clashes between the two sides has emerged again over the weekend. The incident started when some merchant ships failed to navigate along Iran's designated routes, leading to them being intercepted with weapons fire, while the US bombed Iranian regional facilities once again on the grounds that Iran did not adhere to the terms. In reality, the entire process is no different from before the memorandum was signed; they fight and talk to increase their respective bargaining chips, and then pull back to the negotiating table to renegotiate. The rhythm of the entire financial market will continue to be pulled back and forth by relevant news, and investors should prepare for a roller-coaster ride. Of course, for short-term speculators, this is a rare, high-volatility speculative trading opportunity.
I. Renewed US-Iran Conflict, Watch for Crude Oil Rebound Opportunities
Since the signing of the memorandum, crude oil has seen a maximum drop of 17%, and the decline from the highest point of oil prices during the US-Iran conflict has also reached 32%. According to past experience with crude oil price volatility, the decline after the easing of war conflicts is usually not smooth sailing; a sharp drop followed by a major rebound is its norm. Whether it was the Gulf War in 1990 or the Russia-Ukraine conflict in 2022, their subsequent downward trajectories were accompanied by sharp rebounds following war news before hitting new lows again. The current crude oil price fluctuation process is very similar to the 1990 Gulf War, as both are affected by the actions of the warring parties. Technically, after the US and Iran signed the memorandum, a price gap appeared in oil prices at $83/barrel, which is an important resistance level for future oil price rebounds. If prices break through this level, it means there is no room for peace talks between the US and Iran, and the unblocking of the strait is even more out of reach; currently, the probability of this is not high, as both sides are still testing each other's negotiation bottom lines. However, for the recently sluggish oil prices, the news of renewed firing will reignite bullish interest in buying the dip, and oil prices will inevitably see a rapid rebound. The price is expected to rebound from 70 to over 80, a margin of 15%, which is sufficient for oil speculators to capitalize on. That being said, rebounds happen quickly, and so do reversals; once an agreement is reached again, oil prices will turn back down or even hit new lows, so long-term holding is not recommended.
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II. Has the Nasdaq Peaked?
Among the four major US indices, the Nasdaq was the worst performer last week. Ever since the market's expectation for Federal Reserve interest rate hikes strengthened, the Nasdaq's performance has been weaker than the Dow and the Russell 2000. As the focal point of the market, this is not a good sign, indicating that the market has developed concerns about whether the actual future revenues generated by AI can cover the current investments. Furthermore, technically, after the US and Iran signed the memorandum, Nasdaq futures, like crude oil, experienced a price gap, with the gap position located near 30,000 points. If it were a strong market, this gap should not be filled and should hit new highs again, but last week the market chose to fill the gap and correct, meaning investors must be alert to approaching risks. Because the valuation of the Nasdaq will certainly be relatively high after a massive surge, the extent of the downward correction is estimated to not be small, so it is recommended that investors try their best to avoid risks. If the Nasdaq rises and stabilizes at 30,000 points in the short term, it will not be too late to re-enter the market.
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