Not too surprisingly, the Iran problem didn’t go away over the weekend.  If anything, both sides are making threats that would significantly expand the conflict. What’s more, Trump’s unilateral actions have resulted in Iraq’s parliament calling for all US troops to withdraw from Iraq – without question an important win for Iran.

Trump’s 2011 predictions of a politically-motivated attack on Iran by Obama (which obviously never came to pass) are causing many to question the timing and motivation of his own actions, not to mention the existence of a coherent Middle East strategy.

So far, equities’ reaction has been contained.  Though, gold and bonds are providing a less filtered reaction to the escalating risks. Gold popped up to tag our next upside target… …and, 10Y notes broke out.Past Trump-related emergencies (trade war, impeachment, etc.) have been easily downplayed or explained away. I can’t imagine that Trump or his sycophants will be able to spin this latest series of missteps as unimportant.

continued for members…

If ZN pushes above its SMA100 at 129’250, it has potential to 133’050. TNX’s version of the above:The falling 10Y is compressing the 2s10s, which is again backtesting the broken yellow TL from Oct 2018.

CL has tagged its white .886 and, having broken out above the red TL, will threaten the April highs if it breaks 64.77.  After that, 69.51 comes into play.  If it can’t break the April highs, it will be very susceptible to a downturn.Remember, if the rising white channel breaks down, we could be looking at a major crash.Meanwhile, RB failed to break out past either its SMA200 or the red TL from the April highs and is well above the range it needs to trade in in order to keep inflation in check. For those not already short, this is the place. As we discussed last week, VIX is still the primarily throttle on the market’s reaction.  The red TL is around 17, and the SMA200 remains at 15.03. A drop through 15.03 would serve to quiet things down while a push above 17 would accelerate equities’ downturn.ES made a higher low overnight, so bulls might be expected to keep the bounce going starting with a backtest of the SMA5 200 at 3221 around the open. If it breaks lower, however, I’m still looking for a backtest of the broken purple channel top around 3178.

The SPX version.On the currency front, USDJPY is backtesting the SMA100, with plenty of downside available.

While EURUSD is backtesting its SMA200 again. This leaves DXY in an extended backtest of the red TL connecting its 2019 lows.We’re likely to get some attempts to stabilize the markets today. We might even see some efforts to put a lid on oil such as a release from the Strategic Petroleum Reserve. But, the mood is likely to be dark. And, I’d be surprised if the market doesn’t test those downside targets.

Meanwhile, I’m taking a fresh look at our oil/gas forecast in light of the latest developments.  I’ll finish that post shortly.