Major developments are in the making as President Trump headed to China with the center focus being the Iran war. Out of the many countries feeling the impacts of the closed strait, China is a large player in this. China refiners purchase up to 91% of Iran’s total exports in oil. Safe to say both Iran and China are not happy with what’s currently going on right now. While this was an important topic for this meeting, there’s plenty more being talked about. this trip focuses on stabilizing US-China trade tensions, technology competition, as well as Taiwan.
The President is trying to secure purchases of plenty of goods and improve access to American tech firms. Compared to the main goal for China being to gain better access to US chips. Seems that both sides are quite aligned and willing to let ends meet on a strong partnership.
As long as an agreement is made allowing access to US chips, TSM and NVDA will see a large inflow of revenue. One of the largest markets will open back up giving legs to this rally. Best part of this is the fact both of these stocks are already in strong uptrends with price at ATH. While the gains seen in the last couple years on NVDA are behind us. The clear dominance from the company will continue to prosper. Recently, many have focused on other stocks in the sector as they have exploded higher bringer unreal YTD moves. Within the next 2 months we should see funds pour back into NVDA.
Taking a step back, these two stocks will not be the only ones to benefit from this. An agreement between the US and China will allow purchases of chips from all firms and any equipment to go along with it. This means other stocks in the Semiconductor sector will also rise. One for example will be ASX which we purchased in the low 15s and is on the brink of crossing 40. Stocks like INTC will also do great which we purchased in the low 18s.
From this perspective it makes a really robust bull case for the remainder of the year. Our focus on us data like Inflation begins to not be a problem as investors continue to purchase stocks. Hence why we are moving higher while inflation data is climbing.
Another key component of this agreement is inflation is transitory. China talking with Iran on opening the strait will bring inflation right back down. Hence why money continues to flow into US stocks. If this wasn’t the case then we would see buying dry up and plenty of this rally would vanish. Reality is the majority of funds are risk on as they believe escalation of the US-Iran war is unlikely.
Regardless of your take or my take on all of this, price is what truly matters. We can use a hypothetical examples for this to give further explanation.
Let’s say the US began striking Iran again so the war is resumed. This means the same war that brought the selling is back on and you expect the market to rollover again. But one problem, the market will not selloff. Instead we see little selling and prices continues to balance at highs.
Are you going to say your right for shorting the market because the war is back on? No.
Are you going to say the market is being manipulated? Maybe.
The reality is that price is the only factor that matters in all of this. Remember, when trading/ investing your only goal is to make money. Doesn’t matter what you think because at the end of the day the market doesn’t care either. You either made money or you lost money. Too many people focus on a theme that is expected to move markets but this only leads to mistakes.
Think about all of the traders that said this war isn’t over so this rally will fail. Every single one of them that continued to short have likely lost a majority of their capital just by being in denial.
You need to get one simple fact in your head: Price is the only factor that matters.
Once you have this basic understanding then you will start to see why Volume Profile and Moving Averages work so well.
Volume Profile tells us the prices that buyers and sellers are in control.
Moving Averages tells us which way the wind is blowing.
This is a quite basic way to put it but overtime you will see just how powerful both of them are. My approach simply focuses on trend, even when using Volume Profile. I explain this in detail in this post: Mastering Volume Profile
Let’s now breakdown the structure on the indexes then move to all the stocks on the radar for this week.
