Per yesterday's video commentary, during the weekend we went from preparing to withdraw militarily to a 48 hour ultimatum, with weekend equity market proxies responding as expected -- rallied on the former, plunged on the latter... In the wee hours this morning the US headlines read that the US and Iran had constructive talks over the weekend and that strikes on energy infrastructure would be halted for 5 days while negotiations continued... Iran reported that there were no such direct talks, thus, assuming they indeed occurred, they were no doubt via the channels I referred to yesterday.
With the exception of gold, the reaction (albeit just one morning) across our positions is tracking as I suggested it would. I.e., the areas that felt outsized pain during the conflict thus far are experiencing outsized gains so far this morning... As for gold, our hedge, now very close to the money, is offsetting nearly all of this morning's decline.
In a nutshell, this morning's events don't present a ceasefire, nor a framework... But it is the first credible diplomatic signal since the war began on February 28th, and the market is treating it exactly the way the crowded-bearish-positioning thesis said it would -- hard and fast to the upside.
In essence, this is the squeeze we've been mapping. The question now is whether it has legs -- or whether it's a one-day decompression that runs out of fuel before anything structural resolves.
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