Stocks: Was That The Bottom On Monday?

On Tuesday night, we suggested that the S&P 500 might have bottomed on Monday, with a pullback of 9.1% (i.e., just under a 10% correction) from its January 27 record high. Tuesday's strong equity rally was triggered by reports that the US had found an exit ramp from its war with Iran. Wednesday night, President Donald Trump confirmed that the US would exit in two to three weeks.

Stocks opened lower today as oil prices rose on fears that the US would exit the war without opening the Strait of Hormuz. Stocks then recovered during the day on reports that Iran and Oman are in the "final stages" of drafting a new joint protocol for the Strait of Hormuz. However, this is not an agreement to "open" the waterway in the traditional sense; rather, it is a move to formalize a new, restrictive navigation regime. Apparently, traders interpreted the "protocol" as a sign that a framework for managed transit is at least being discussed.