Quick Morning Note: Noisy by definition!

The budding narrative that sent stocks soaring Tuesday, with some follow through yesterday, got abruptly turned on its head last night.

Reuters this morning:

“Hopes for a swift end to the ​Middle East war faded on Thursday after U.S. President Donald Trump vowed more aggressive strikes on Iran, sending oil prices back well over $100 a barrel in a blow to consumers around ‌the world.”

Me yesterday, referring to Tuesday:

“… with regard to yesterday’s market action, while the rally was impressive, and relatively broad-based, positioning and sentiment was notably bearish going in… Thus, that upside move was no doubt exaggerated via short covering, options dealer positioning, etc… Not to discount the message of the market, just putting the extent of the move into its proper context.”

So, like Tuesday, when sour sentiment and its accompanying bearish positioning, with all its leverage, gets hit with a seriously positive narrative, suddenly a combination of FOMO (fear of missing out) and desperation to unwind now-painfully bearish bets sets stocks afire (in a good way)… I.e., in a virtual instant, sentiment and positioning resoundingly shifted from bearish to bullish.

So, then, when rosy sentiment and its accompanying bullish positioning, with all its leverage, gets hit with a seriously negative narrative, suddenly a combination of fear (read panic) and desperation to unwind now-painfully bullish bets sets stocks a-burning (in a bad way), as we're witnessing this morning… I.e., in a virtual instant, sentiment and positioning resoundingly shifted from bullish to bearish.

But wait! I typed the above while sitting in my car in the Sprouts parking lot at 6:45 PDT this morning (they open at 7)... It's now 7:50, I'm at my desk and the Dow isn't down 600+ points anymore, it's down a mere 100 points, and the S&P has gone from well over 1% down, to a mere -0.22%.

Sifting through the headlines, clearly it's the following that just caught the market's attention:

"Iran's Deputy Foreign Minister Gharibabadi confirmed that Iran and Oman are working on a draft protocol to regulate navigation through Hormuz during peacetime, framing it as a mechanism to facilitate safe transit and provide services to vessels — not as a restriction. The drafting process is described as in its final stages, after which Iran will begin formal negotiations with Oman to finalize the joint protocol."

I get the market's positive response (and never forget how one-sided positioning can exaggerate surprises [or perceived surprises] in the opposite direction), but, for certain, there's lots beneath that headline yet to be parsed... Who knows where the market will be by the time you receive this note -- call it noisy, by definition!

We'll leave it there for now.

Stay tuned...