The Dow Jones Industrial Average tried to rally a bit during the trading session on Tuesday but has been hammered since word got out that the Americans and the Iranians are refusing to talk.
The talks have been on hold now and it looks like a situation where risk starts to run away from the market, especially as interest rates pick up.
I do think eventually we will have to come to some type of serious conclusion to the Iranian war, but with interest rates heading back towards the 4.30 level, this is an area that I think is going to be a bit difficult. The Dow Jones 30 will have to deal with that and, of course, the fact that it is a little overbought. A pullback from here makes quite a bit of sense, although I'm not necessarily looking for some type of massive collapse; I think it's more like a pullback towards the 49,000 level makes the most sense.
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Middle East Headlines and Market Momentum
Quite frankly, it wouldn't surprise me at all to see this market go into some type of consolidation as we try to determine where we can find enough momentum to get moving again. I do like this pair in general, but I also recognize that it is a market that will remain very beholden to the latest nonsensical headlines coming out of the Middle East. After all, there are plenty of people in the Middle East right now playing games when it comes to the media and, of course, the final financial markets.
If we were to break to the upside, the market breaking above the 50,000 level would be a very strong sign indeed. At that point, I think you have market participants looking to really push this pair, this market higher, but I also recognize that it would take a certain amount of momentum to truly make that happen. I think we need good news from the Middle East to continue that type of momentum.
In the short term, it might just be easier to simply buy the pullbacks. On a dip that shows signs of bouncing, you might have an opportunity to pick up cheap contracts. I have no interest in shorting at this point as the markets continue to at least look like they want to go higher, so therefore I don't want to fight that overall move.
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