Geopolitical Risk Alert: What You Need to Do Now
In a Nutshell
Markets are testing resistance at QQQ 740 while geopolitical escalation risks from US military action against Houthis and Ukraine's drone strikes on Russian refineries threaten to drive oil prices and inflation higher, increasing the odds of additional Fed rate hikes. The AI boom is the only thing propping markets up—without it they'd be 20-30% lower—and this disconnect from struggling consumers creates fragility at current levels. Short-term traders should respect the resistance range and avoid aggressive positioning, while expecting potential volatility as markets determine whether they can break higher or will pull back.
These notes were generated by AI and may contain inaccuracies.
In just 24 hours, market conditions can change drastically. Yesterday's sentiment was optimistic as Iran was reportedly speaking to mediators to potentially end the war with the US, with specific requirements including ending the war on all fronts and releasing their money. Trump stated that Iran was begging for a deal, which could settle due to huge inflation concerns.
The Federal Reserve began raising rates last week due to inflation concerns driven by oil prices creeping higher during escalations. Markets can pretend they don't care about rate hikes, but eventually they will care. Markets sold off for nearly 12 consecutive months in late 2021 or early 2022 during record high 40-year inflation. While current inflation levels don't match that caliber, oil price increases during escalations create ongoing concern.
The NASDAQ market has common patterns that tend to repeat themselves, though they don't always have to. The common resistance range shows that over the past 2-3 months, markets have traded within range without making new highs beyond 740 for QQQ (the NASDAQ one-for-one ETF). Markets held at 700 per share for QQQ except for one drop to lows of 650.
Even when the Federal Reserve raised interest rates, markets hit lows of 700 but held strong support. The 700 level represents a strong support range that makes it more sensible to cover shorts knowing markets are resilient and always willing to recover.
Markets are now testing the previous resistance range at 740 for QQQ. This resistance range doesn't mean selling everything, especially if invested, but suggests not being super aggressive at these levels in case markets pull back. Being at resistance doesn't mean markets can't break above, just as being at support doesn't mean they can't break below.
The US is reportedly preparing a large-scale military operation against the Houthis in Yemen. The Houthis are attacking another smaller strait, prompting potential US intervention. This escalation will drive oil prices higher, which will drive inflation higher, making rate hikes more probable.
The Federal Reserve stated they expect to raise rates at least one more time in 2026, with this being a unanimous decision. In 5 weeks, there's a 59% probability that the Federal Reserve will raise rates again. The question remains how much more rates can be raised before markets actually begin to correct.
Ukraine's official platform on X.com posted about "Moscow burning day." Zelensky, the Ukrainian president, stated that long-range responses have had significant impact in the Moscow region. Ukraine fired one of its largest drone attacks ever, estimated to include 1,600+ drones targeting the Moscow region and hitting the city's main oil refinery.
This attack comes just six days after Trump stated that Ukraine and Russia agreed not to hit energy targets in an effort to lower diesel prices. Diesel prices are up 88% since January. The "safest Russian refinery in the world" was totally destroyed by a swarm of Ukrainian drones, with pictures and videos being shared.
Diesel price increases affect truck drivers who transport all consumer goods. When their costs go up, they pass costs to sellers, who then pass costs to consumers. This affects literally everything that gets transported, meaning oil price inflation will seep into other areas for the CPI report.
Bitcoin is dumping after rumors suggest the US could intervene militarily in Yemen against the Houthis. No major outlets initially reported this, but major outlets later confirmed the reports.
This is Trump's economy and Trump's market. If he sends out a tweet providing reassurance, markets can remain elevated. Markets might be able to sweep bad news under the rug due to this resilience. However, if markets do pull back, it would be welcomed as markets should be trading significantly lower.
Inflation and high demand are propping up the market. Without AI, markets would be trading 20-30% lower because everything else is struggling. Consumer demand is lower and the average American is feeling pressure. Housing demand is slowing not just because of inflation concerns or mortgage rates, but because there aren't as many jobs available as people entering the market.
The inflation report is calculated based on the last 12 months before seasonal adjustment. Looking back 24-48 months shows significant price increases that may not be immediately noticeable month-to-month. Average consumer goods that cost $60 four years ago may now cost $80, representing significant increases beyond just oil or gas prices.
The unemployment rate is calculated based on the last four weeks of any adult actively looking for a job. After 4 weeks, if someone was looking but is no longer looking, they're no longer counted in the unemployment rate. This calculation method affects how the rate is reported versus the actual employment situation.
40-50% of Americans aren't invested in the stock market. Markets are trading at all-time highs, but most Americans aren't invested, and the top 1% owns the majority of the market. While markets do well, the average American isn't thriving despite the market performance.
Markets are at current resistance range and this should be acknowledged and respected. Market futures will show whether markets gap down starting the week or break resistance to retest previous highs. For those willing to take risks to go higher for longer, the resistance range requires attention.
Markets are irrational and willing to prop themselves up higher because of the AI boom. The disconnect between markets trading at all-time highs while average Americans feel pressure indicates underlying issues that markets have yet to fully accept.
Keep Ricky Gutierrez in your library
Save the videos and channels worth coming back to, and find them again in one place.
