Market Needed An Excuse To Pull Back – Israel Provided It

I have recently written about the stock market rallying very far and very fast. A pullback was due. The Volatility Index (VIX) was one clue that some weakness was imminent as it was up the past two days without stocks being down. You may have to squint, but look at the far right side of the chart below to see what I mean.

With Israel attacking Iran on Thursday night, the excuse for lower prices came. A 2-4% pullback would shake out the weak-handed holders I have been chirping about lately. You know those folks. They sold into the tariff tantrum plunge. They hate and disavowed the rally until the last few weeks. Then they bought near the peak and revised history to say they have been bulls for a while. Buy high. Sell low. Rinse and repeat.

2-4% lower could be a screaming buy unless the attack spreads regionally which is certainly possible. And it’s Friday so don’t be surprised if investors do not want to go home with max long exposure. It would be a moral victory for the stock market to close down 1% or less.

When I run through the major stock market indices, I find that the S&P 400 mid cap index is the only one that did not exceed its May high. This is the index I will be most interested in watching assuming the pullback takes shape.

I also want to see if bonds and gold offer safe havens. The former saw yields come down sharply the last two days as if someone knew. My thesis has been that bonds stay in a wide trading range for a while with weakness being bought and strength sold. I fully expect oil to spike. No surprise there.

The weekend is here and CT is still waiting for some warmth. It’s likely to be the 16th straight weekend with rain if that’s even believable. I see golf in my future with lots of family time including a parent/child, 9 hole golf tourney with my wife and in-laws. It’s also the U.S. Open at Oakmont in Pittsburgh, a course I had the privilege of playing almost exactly one year ago. The course is a bear, one of the hardest  I have ever played. My arms were tired from trying to hit out of the rough so many times. As the story goes, under the cover of darkness the powers that be quietly removed 2000 trees overnight when setting courses back to their original layout became the in thing.

And the Oakmont Bakery is epic, maybe the greatest one on earth.

Finally, as some of you know, I am the hugest fan of Diners, Drive Ins and Dives. Whenever I am on the road, I seek out places from the show. Primanti Brothers did not disappoint!

On Wednesday we bought SSO. We sold QLD, SPHB, some MQQQ, some ARKK, some XHB and some UWM. On Thursday we bought PCRX and QLD. We sold DH and SSO.