S&P and a very timely correction for the U.S. presidentUS SPX 500OANDA:SPX500USDSamanFx0With the start of the boxing match between the U.S. and the regime in Iran in the Middle East ring, and with rising threats around the Strait of Hormuz, around 20–30% of global oil and gas supply could be disrupted—at least in the coming week (hopefully not for long). Usually, these kinds of tensions inject fear into the markets and create a chain reaction. The first domino to wobble is energy—and in this case, specifically oil prices. So how does this chain look in our case? Higher Oil Price --> Higher Inflation --> Higher Interest Rates --> Lower Corporate Profits Can you see the connection with the S&P? Markets move on trader sentiment and the perceived future value of the assets they trade. So what should we expect for the S&P? If the S&P breaks below $6790, my next target is $6500. The downtrend can be reinforced by sustained higher oil prices and a stronger DXY (>97). In that case, the S&P could reach $6150. Why is this timely? We have the U.S. presidential midterm elections in November. That gives President Trump’s administration enough time to potentially revive the market and show strong growth in the months leading up to the election. Recency bias plays a role here. A new Fed Chairman will be in office by the end of May. As you may know, Kevin Warsh has been announced as the next nominee, and he is considered hawkish. So at least until June, the market will likely price in “no rate cuts.” Seasonality in the S&P also shows that around this period we often see corrections—and sometimes the lowest prices of the year. (Note that, I made the seasonality chart myself and the big moves during the COVID period have not been excluded)