The S&P 500 (6699) has performed well given the uncertainty created recently by the U.S. attacking Iran and starting a new war. A 5% pull back with such an event is quite normal, so recent weakness seems to be already under control. American investors appear to embrace wars because typically U.S. stocks rally on a war after the initial negative response, so I expect the momentum of our markets to continue higher into the summer. If the war becomes unmanageable, because Iran is fighting for their survival and we’re not, I expect that the U.S. will pull out of this confrontation and claim victory and our markets will continue on its merry way. The 2nd choice is to stop tariffs altogether, but I don’t think this is an option.

From my statistical research, I expect Stratos Intermediate Target of 7056 to be tested on the S&P 500 before the summer, I’m not as confident that the market has enough momentum to test my Primary Target of 7348. My Intermediate Support (6421) could be tested anytime if the Strait of Hormuz were to be blocked for an indefinite amount of time, or if/when China starts a confrontation with Taiwan, which would further the correction sooner than I anticipated. The fact that oil prices have gone up significantly and U.S. stocks have gone down so little does indicate the underlying strength of the S&P 500.

One of my major concerns is that the Chinese military is likely to attack Taiwan and some media outlets describe reporting as “large-scale military movements” in this area. With the U.S. tied up with other wars, this uncertainty makes it more likely, than not, that the Chinese see an opportunity which would further create chaos that could affect current market momentum.

Investors need to be prepared for the likelihood of sustained, higher energy prices and material costs. I continue to overweigh the energy, material, and industrial sectors because they may benefit from higher commodity prices as well as offer high dividends.