The Dow jumped 900 points Thursday because Trump said he'll sign a deal with Iran. Oil prices fell. Retail traders celebrated not having to understand the Middle East.
Let's be clear about what happened here. The President made a statement about a future agreement with a country most Americans can't locate on a map. The market rocketed. Oil tanked. Billions of dollars moved based on words about a deal that doesn't exist yet, negotiated by people who couldn't agree on lunch, concerning a region that's been a geopolitical powder keg since before your grandfather was born. But sure, the 900-point move was totally rational price discovery.
Some guy in Michigan with a Robinhood account just made $340 on call options he bought because a Discord user named CryptoPatriot told him to. He thinks he understands global energy markets now. He's already planning his boat purchase. The boat costs $85,000. His account balance is $1,200. The math works if you don't do it.
Oil traders spent years analyzing supply curves, OPEC production quotas, and Iranian export capacity. Then Trump talked for ninety seconds and erased their entire thesis. They're updating their models right now, plugging in variables like "presidential mood" and "likelihood of follow-through." The formula includes a denominator of zero.
Friday's session will feature investors trying to trade on information that might be true, about an agreement that might happen, affecting oil prices that might matter. They'll call it analysis. They'll use words like "positioning" and "risk-off." What they mean is they're guessing, same as always, except now they're guessing about whether a deal that was announced but not signed will actually get signed, and whether it'll matter if it does.
The charts don't care about Iran. The 50-day moving average didn't wake up Thursday and read the news. Support at 38,000 doesn't have an opinion on Middle East diplomacy. But retail traders will spend Friday drawing lines on their screens, convinced they've found the pattern that predicts geopolitical outcomes. They haven't. They've found shapes that look like other shapes.
Photo by Maxim Hopman on Unsplash
Leave a Comment