To The Moon

Trump ultimately opted for the "Winning Strategy" we predicted to try and defuse the situation in Iran. While this somewhat delayed move briefly pushed oil prices down from $119 to below $80, the unresolved issue in the Strait of Hormuz has kept oil prices firm, preventing the situation from returning to an ideal state.

As the Middle East narrative is likely to stretch into a significantly longer cycle, the risks of high oil prices transmitting into broader inflation will materialize. One thing is certain: the longer this drags on, the bigger the trouble for financial markets.​

From a technical standpoint, oil prices printed a massive Doji star last week, characterized by exceptionally long upper and lower shadows. Typically, after such a structure appears, the market requires time to digest the price action—much like the previous $5,600 to $4,400 wave in gold. In other words, crude oil is highly likely to remain trading above the $80 mark in the short term, entering a phase of range-bound consolidation.​

As we have previously emphasized, $80 is a highly critical level. Not only is it significant from a pure price perspective, but it also represents the actual extent of the US's control over oil prices and inflation. Although the immediate worst-case scenario was averted last week through a "victory without winning," crude oil stabilizing above $80 is a ticking time bomb in itself. Only if prices return to an equilibrium centered around $70 can everything potentially revert to the conditions seen before late February.​

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Equity markets are already feeling the chill. Both US and Japanese stock indices experienced a highly turbulent and precarious week. The S&P 500 posted its third consecutive weekly decline, with a mid-week rally ultimately ending in failure. The 6,520 level stands as the final stronghold for the bulls; the risk of accelerated downside upon breaking this support is obvious. The Nikkei is already showing signs of a minor breakdown, and Japan has been one of the most obvious collateral victims of the current Iranian situation. The ideal scenario would be for the market to navigate the remainder of the month in a choppy, sideways pattern, trading time for an opportunity to pivot. Generally speaking, however, in this kind of environment, bears will at least attempt to sweep the stop-loss orders below.​

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Returning to the news cycle, the probability of the US and Iran sitting down for talks at this moment is extremely low. Even if some covert, behind-the-scenes contacts occur, the chances of reaching a public agreement are slim, as it would conflict with the face-saving efforts on both sides. The posturing and skirmishing are likely to continue through the end of the month, and a substantive turning point may not emerge until after the US-China meetings in April. If the April window fails to resolve the issue, we must brace for a long-term geopolitical storyline akin to the Russia-Ukraine conflict. By that point, oil prices will have absolutely no chance of coming back down. Whether viewed from a short- or medium-term perspective, adopting a relatively conservative strategy is likely the most appropriate choice right now.​

Finally, let us briefly discuss the US dollar's price action. Trend-wise, the dollar has clearly benefited from the geopolitical conflict, contradicting earlier expectations—the news has unexpectedly turned into a bullish catalyst for the greenback. Although short-term price action does not support aggressive shorting, the fundamental logic dictates that the erosion of dollar hegemony remains the long-term directional trend. The key focus for this week and this month is whether the potential double-bottom pattern can achieve a decisive breakout. If an upside breakout occurs, we can wait to probe shorts near the next theoretical target levels around 104/105. If the dollar faces persistent rejection at current levels, we will look for selling opportunities over the subsequent 1 to 2 weeks.​

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Regarding this week's strategy, we continue to hold our short positions in gold with an average entry price of 5,300, and we have opted to further trail our stop loss down to the 5,250 level. The targets remain unchanged at 4,870 and 4,490 (taking off half the position at each level).​

Additionally, we have established a new buy limit order for gold at 4,650, with a stop loss set at 4,420 and a target placed above the recent new highs. This order is Good 'Til Canceled (GTC). (Triggering the long position may involve closing out part of the earlier short position, but this does not affect the overall strategy construction.)