Financial Markets Navigate Geopolitical Tensions
Financial markets are under pressure, especially when geopolitics comes into play. Currently, with concerns in the Middle East, one might expect the worst. However, the stock market is holding up. In fact, the indices are doing quite well. Let’s decrypt this surprising situation together, see how I adapt my discipline, and why sometimes it’s better to stay on the sidelines.
The Context: Diplomatic Rumors
Currently, tension is high between the United States, Israel, and Iran. On one hand, Donald Trump claims that negotiations are progressing. On the other hand, the Iranian government categorically denies any discussion. Basically, we have completely contradictory information.
But honestly, no one is lying. It’s just the harsh reality of diplomacy. Negotiations in times of crisis always involve intermediaries to maintain a structural safety net. Imagine a beautiful hotel. The Americans are in one room, the Iranians in another. Mediators shuttle back and forth in the corridor to pass on messages. This is the famous open channel, an unchanging historical tradition.
Despite this constant uncertainty, we clearly see that the markets are not giving in to panic.
Signs of Fearlessness
To get a clear picture of the situation, just look at the assets people turn to when things go wrong. And there is an absolute surprise:
- Gold is collapsing: Historically, when afraid, people buy gold. Protecting money is human nature. However, gold has lost almost 12.5%. It can’t even hold its ground against the news.
- Bitcoin is stagnant: After a failure below $75,000, it has dropped 10%. It’s currently moving in a range, stuck around $70,000.
- No sudden panic: If the fear was extreme, we would see a 10% drop in a single day with trading suspensions. The current decline, although real, is slow and without destructive waves.
- Oil is slowly rising: Our WTI barrel is showing some signs of recovery. This reminds me of the anomaly of Covid. Global slowdown was so severe that storage costs skyrocketed. People were practically paying you to get rid of barrels because it was too expensive! Thankfully, we are far from such an extreme situation today.
My Discipline in the Face of Hesitant Markets
On Nasdaq and S&P 500, we are trapped in “ranges.” In short, prices are moving back and forth in a narrow corridor of just 1%, making cycles difficult to read.
This morning, around 7:15, I saw a good buying opportunity on Nasdaq, precisely at my favorite level of 24,240. The market then bounced 40 points shortly after. If I had taken the trade, my day would have been made. However, I must admit that I didn’t take any trades.
Why such a decision? Simply because of the order book (the table showing buy and sell orders). There was a huge gap between prices, commonly known as the spread. Liquidity providers were absent. In my eyes, capital always matters more than ego. At 52, having survived crashes for 32 years, it’s thanks to this strict prudence, especially outside European trading hours.
In Europe, CAC 40 is attempting a difficult rebound above 7,800 points after many days of decline. The German DAX, on the other hand, is clinging just below 23,000 points following a significant downward trend of over 10%. However, let’s take a moment to be nuanced: stopping retreat on one front does not necessarily mean victory in the war. There is still a strong downward inertia in the charts, and solid confirmations are needed to dispel doubt.
Conclusion
To sum up, the current mental framework requires patience and asymmetry in your risks. Indices often lack clear direction at certain times of the day, but there is no systemic panic at play. Stay cautious, always prioritize safeguarding your assets, and avoid trading at the slightest technical hesitation.
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