Financial markets are under pressure, especially when geopolitics are involved. Right now, with concerns in the Middle East, one might expect the worst. However, the stock market is not collapsing. In fact, the indices are holding up pretty well. Let’s decrypt together this surprising situation, see how I adapt my discipline, and why it’s sometimes better to stay on the sidelines.
Context: Diplomatic whispers
Currently, tension is palpable between the U.S., Israel, and Iran. On one side, Donald Trump claims that negotiations are progressing. On the other side, the Iranian government flatly denies any discussion. Essentially, we have completely contradictory information.
But honestly, no one is lying. It’s just the harsh reality of diplomacy. Crisis negotiations always work with intermediaries to preserve a structural safety net. Imagine a magnificent hotel. The Americans are in one room, the Iranians in another. Mediators shuttle back and forth in the corridor to relay messages. This is the famous open channel, a historically constant tradition.
Despite this constant uncertainty, it is clear that the markets are not giving in to panic.
Signs proving the absence of fear
To get a clear view of the situation, just look at the assets people turn to when things go wrong. And here’s the surprise:
- Gold is collapsing: Historically, when people are afraid, they buy gold. Protecting one’s money is human nature. Yet, it has lost nearly 12.5%. It can’t even hold its ground against the news.
- Bitcoin is stagnating: After a notable failure below $75,000, it has lost 10%. It’s currently stuck in a range, hovering around 70,000.
- No sudden panic: If the worry was total, we would see a 10% drop in a single day with trading halts. The current decline, albeit real, is slow and without destructive waves.
- Oil is slowly rising: Our WTI barrel is showing some signs of life. This reminds me of the Covid anomaly. Global slowdown was such that storage costs were soaring. They were practically paying you to get rid of barrels because it cost an arm and a leg! Thankfully, we are far from such an extreme scenario today.
My discipline in the face of hesitant markets
On the Nasdaq and the S&P 500, we are stuck in “ranges.” In simple terms, prices are making small back-and-forth movements in a narrow corridor of barely 1%, making cycles hard to read.
This morning, around 7:15, I saw a great buying opportunity on the Nasdaq, precisely at my favorite level of 24,240. The market then bounced 40 points shortly after. If I had taken the position, the day would have been made. However, I admit I did not make any trades.
Why such a decision? Simply because of the order book (the table displaying buying and selling requests). There was a huge gap between prices, commonly known as the spread. Liquidity providers were missing. In my view, capital always matters more than ego. At 52, if I’ve survived crashes for 32 years, it’s thanks to this strict prudence, especially outside European trading hours.
In Europe, the CAC 40 is attempting a difficult rebound above 7,800 points after long days of decline. The German DAX, on the other hand, is just clinging below 23,000 points following a sharp drop of over 10%. But let’s take the time for nuance: stopping a retreat on a front line does not necessarily mean winning the war. There is still a strong downward bias in the charts, and solid confirmations will be needed to dispel doubt.
Conclusion
To sum up, the current mental framework requires patience and risk asymmetry. Indices often lack clear direction at certain times of the day, but there is no systemic panic in play. Stay cautious, always prioritize protecting your assets, and avoid trading at the slightest technical hesitation.
