Operation Epic Implosion

Two months into what was originally supposed to be a two week war, fake peace talks just failed. So begins the next round of an escalating war...

To recap:

The U.S. and Israel have pounded Iran for the better part of two months while Iran has kept the Strait of Hormuz closed. The stakes are rising on both sides, but MOSTLY the stakes are rising for the rest of the world which is now hostage to this cage match. The first round of peace talks took place two weeks ago (April 11th and 12th) and they failed to achieve any agreement. However, this second round of "peace talks" never even took place, because both sides negotiators failed to meet in Islamabad this weekend as had been touted all week by the media. The problem is that Trump has attacked Iran twice during peace talks - last June and again in February - so Iran has ZERO incentive to negotiate a peace treaty. They view this as an existential fight with no REAL alternative to negotiate. Meanwhile, despite a two month fiasco, Trump is as over-confident as he was at the start of the war. This time instead of two aircraft carriers he has ordered three aircraft carriers to the Middle East. It's the largest U.S. contingent in the Middle East since the start of the Iraq war in 2003.

Which gets us to markets and the economy:

Markets are now TOTALLY disconnected from reality. Both the Nasdaq and the S&P 500 made new highs on Friday before these latest Saturday fake "peace talks" took place. The semiconductor sector is Y2K overbought, with the longest daily win streak in history (by three days) AND the largest percent gain since the Y2K LOWs which coincided with the Iraq war start.

As we see in the chart below, since the start of April, momentum markets have been systematically manipulated higher by Trump's daily promises that the war is almost over. Semiconductors are now up 50% in April and the NDX momentum sector is record overbought going into a second round of warfare. Even if there wasn't a war, this level of euphoria would end BADLY: In ALL five times in the past five years that momo stocks got overbought (lower pane), they ALWAYS came back to the 50 dma, which implies a 19% drawdown MINIMUM.

Another reason that markets are totally disconnected from reality is because wealthy investors have MADE money from this war:

"Markets are looking beyond the Iran war to a year of healthy profits and stock gains. Investors in our latest Big Money poll share that sentiment."

On the other hand, the costs of this war are falling on the middle class and working class. We got news this week that consumer sentiment is officially the lowest on record:

"Anxiety about the war in Iran has left Americans in the grimmest economic mood on record, according to a long-running survey"

Global Markets:

Despite taking the brunt of pain, global stocks ex-U.S. are now overbought again, but at a lower high. Which means that all of the short covering in April ahead of these latest "peace talks" has failed from a technical perspective.

In summary:

Iran has been sanctioned by the world for 47 years and Iranians are used to a high degree of economic pain.

Whereas the world has been sanctioned by Iran for 47 days and the global economy AND markets are now on the verge of imploding.

Believe it or not.

This is the FINAL IQ test.