Market players were skittish Tuesday as they anticipated that Iran would retaliate against the U.S. as it had promised. There was a dip in the closing minutes on Tuesday and then futures plunged overnight as news hit that Iran had launched a dozen missiles at U.S. military bases in Iraq.
As is typically in a situation such as this there was much incorrect reporting and some panicky action in the futures market as traders tried to understand what happened. Iran added to the confusion with claims of significant U.S. casualties.
It quickly became apparent that the Iranian response was little more than a face-saving move that did little damage. There have been no reported casualties as yet and Iran was quick to state it had no intention of further action if the U.S. did not respond.
President Trump tweeted that "all is well" and seemed to indicate that no immediate response was likely from the U.S. He is scheduled to address the nation about the matter at some point here on Wednesday morning.
After all the drama overnight, the early market indications are flat. Many traders are disappointed that they never had an opportunity this morning to buy another big gap down open like there was on Friday and Monday. That has been a consistently positive trade, but it is so well-anticipated now that all the movement occurs overnight.
The most interesting market dynamic right now is that bad news, such as a war with Iran, is primarily used as an opportunity to put cash to work and make new buys. Bad news is not bad for the market. It is great for traders who are looking for movement and is a source of great consternation for pundits who keep looking for reasons why the market cannot continue to trend higher.
The Iran issue is not going to go away quickly, but it is clear that neither side is looking for an immediate escalation and that is good enough for the market right now. There is always the potential for terrorist action, but the U.S. has made it clear that it will act aggressively should American lives be threatened.
Our job at this point is to navigate the market action going forward. The indices are still technically extended and could use some downside in order to consolidate, but this news flow is forcing traders to buy the dips and prevent a healthy correction.
One of the big positives is that there are some good pockets of trading in individual stocks. With earnings season quickly approaching there is more focus on which stocks will perform well, and that is giving traders some opportunities.
My game plan here is to stay focused on stock picking and not to be too distracted by overall market direction. All the major index movement is happening overnight, so the best trading opportunities during market hours is in individual stocks.
Trump's speech to the nation should cause some market movement, but overall the trend remains positive. There is plenty of buying power and many stocks are acting well. Iran was an interesting drama but it is not having any significant impact on the market.
