{"id":57972,"date":"2024-10-02T08:58:22","date_gmt":"2024-10-02T08:58:22","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=57972"},"modified":"2024-10-02T08:59:28","modified_gmt":"2024-10-02T08:59:28","slug":"houthis-and-the-blow-back","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2024\/10\/02\/houthis-and-the-blow-back\/","title":{"rendered":"Houthis and the blow-back"},"content":{"rendered":"

Stocks retraced to test support on concerns over an escalation of hostilities between Israel and Iran and its potential threat to the flow of crude oil from the Middle East.<\/p>\n

Stocks<\/h2>\n

The S&P 500 retraced to test support at 5670\/5700, but rising Trend Index troughs signal buying pressure. Respect of support will likely confirm another advance, with a target of 6000.<\/p>\n

\"S&P<\/p>\n

The equal-weighted index ($IQX) shows that large caps experienced a similar retracement.<\/p>\n

\"S&P<\/p>\n

Financial Markets<\/h2>\n

Bitcoin is consolidating in a narrow “descending flag” channel. Marginally lower troughs are typically a bullish sign, reflecting support. Upward breakout from the channel would signal a fresh advance, confirming strong liquidity in financial markets.<\/p>\n

\"Bitcoin<\/p>\n

Treasury Markets<\/h2>\n

Increased demand for safety drove 10-year Treasury yields lower, again testing support at 3.7%.<\/p>\n

\"10-Year<\/p>\n

Dollar & Gold<\/h2>\n

The Dollar strengthened, benefiting from the same flight to safety.<\/p>\n

\"Dollar<\/p>\n

Gold retraced to test support, but the flight to safety will likely fuel another rally, breaking resistance at $2,700 per ounce.<\/p>\n

\"Spot<\/p>\n

Silver found short-term support at $31 per ounce and will likely re-test long-term resistance at $32.<\/p>\n

\"Spot<\/p>\n

ISM Manufacturing<\/h2>\n

The ISM Manufacturing PMI continues to signal contraction, holding steady at 47.2%.<\/p>\n

\"ISM<\/p>\n

The New Orders sub-index at 46.1% warns of further slowing ahead.<\/p>\n

\"ISM<\/p>\n

So does the Employment sub-index at 43.9%.<\/p>\n

\"ISM<\/p>\n

The Prices sub-index surprised, dropping below 50% for the first time since the beginning of the year, reflecting declining inflationary pressures.<\/p>\n

\"ISM<\/p>\n

Labor Market<\/h2>\n

Job Openings also surprised, increasing to 8.04 million in August. The gap above unemployment indicates continued labor market tightness.<\/p>\n

\"Job<\/p>\n

Crude Oil<\/h2>\n

Brent crude is rallying on fears of an interruption to oil supplies from the Middle East.<\/p>\n

\"Brent<\/p>\n

Conclusion<\/h2>\n

Escalation of hostilities between Israel and Iran is likely to fuel a flight to safety, increasing demand for Treasuries, gold, and silver.<\/p>\n

We expect the S&P 500 to retrace to test support at 5670. Crude oil is likely to rally but remain in a bear market unless Iran attempts to interdict shipping in the Straits of Hormuz and the Red Sea through its Houthi proxies in Yemen.<\/p>\n

The ISM PMI warns of a slowing manufacturing sector, but there has been no significant decline in cyclical sector employment so far. Job openings also maintain a healthy gap above unemployment, indicating a still-tight labor market. The economy is expected to remain reasonably robust until the new year, when liquidity may tighten as the US Treasury likely reduces T-bill issuance, replacing them with longer-term coupons.<\/p>\n

Acknowledgments<\/h4>\n