To The Moon

Over the weekend, Iran once again claimed it had blockaded the Strait of Hormuz, after which the U.S. said the Oman shipping lane was still operating normally. For this kind of news about the strait being blockaded or reopened during negotiations, the market has already built up considerable immunity — it was basically fully priced in as soon as Asian markets opened last Monday. So investors need not be overly sensitive to such news; just watch the market's reaction after the open. The relatively important events this week are the Fed Chair's testimony and the release of the CPI data, on which the market will place its bets regarding rate-hike expectations. Although I don't think the Fed will make any major rate-hike move, the market may use the occasion to react ahead of time, causing a certain degree of volatility.

1. Equity index futures are set for new highs — follow along the moving average

After the non-farm payrolls release, the market has sharply cut the probability of a Fed rate hike this year, and the July FOMC meeting will most likely stand pat. Against this backdrop, U.S. equity indexes are set to make new highs again. However, the recently strong indexes are the Dow (traditional industries) and the Russell 2000 (representing small and mid-cap companies). Clearly, when the tech-representing Nasdaq surged earlier, the Dow and Russell both lagged noticeably; the current catch-up move is a corrective (repair) rally, not a switch in the market's main storyline. It is normal for the Nasdaq to turn strong again afterward, so investors need not rush to chase the Dow or the Russell higher. For risk control, you can reference the moving-average indicator of the S&P 500 (the most sector-balanced index in U.S. equities): consider de-risking only if it breaks below the 20-day moving average.

$Invesco QQQ(QQQ)$ $NASDAQ(.IXIC)$ $ProShares UltraPro QQQ(TQQQ)$ $E-mini Nasdaq 100 - main 2609(NQmain)$ $Micro E-Mini Nasdaq 100 - main 2609(MNQmain)$ $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2609(ESmain)$ $Micro E-mini S&P 500 - main 2609(MESmain)$ $Micro E-mini S&P 500 - Sep 2026(MES2609)$

$E-mini Dow Jones - main 2609(YMmain)$ $Micro E-mini Dow Jones - main 2609(MYMmain)$

2. Oil rebounded as expected, but after the bounce it still has momentum to make fresh lows

Last week I reminded investors that oil would rebound; in the event, an attack on a particular tanker caused a fairly quick bounce. On the whole, last week's rebound was not large, which indirectly reflects the financial market's worry about an oil supply glut. Historically, oil prices that rose because of war usually fall for three straight months and return to their starting point. Oil has now fallen for two months, with July being the third month, and there is still a sizable distance to the pre-blockade low ($55/barrel). Therefore, after this rebound, I do not advise investors to keep being bullish. Managing stop-losses and leaning short is still suitable for speculators, but stop-losses must be executed strictly to avoid larger losses. If you continue to be bearish, I suggest using $76 as the important risk-control level — if it is broken, end the short. At the same time, the 20-day MA is also an important trend-tracking line: if oil makes a fresh low, you can use the 20-day MA as a take-profit condition, or close out for profit when oil falls below $60. At the current stage, expectations for oil should not be set too high.

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