Stocks Jump On Iran, China, and Bitcoin Hopium—But The Big Conflicts Have Not Gone Away

Buying On Hopium

Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL).

Note the following:

• Semiconductors reflect the AI trade, and SOXL is the momo crowd’s favorite.
• The chart shows SOXL bounced above the top band of zone 3 (support) on Friday due to triple witching buying.  Friday also saw aggressive call buying in several semiconductor stocks including Sandisk (SNDK) and Micron (MU).
• The chart shows SOXL is jumping again in the early trade on very aggressive buying.
• There is very aggressive buying in the stock market this morning, especially in the AI trade.  There are five main factors:
  • Hopium about Iran
  • Hoping about China
  • Bitcoin jumping above $85K
  • Greenland deal
  • Anthropic IPO
• President Trump is likely to meet Gulf leaders in New York this week.  The stock market is assuming that the talks will lead to a resolution of the Iran war.  Prudent investors should note that Iran is not part of these talks.  Iran has laid out its demands to end the war, and the U.S. is unlikely to accept Iran’s demands.
• We previously shared with you that a Houthi attack had shut down the East-West Pipeline in Saudi Arabia.  Saudi Arabia had been using the pipeline to bypass the Strait of Hormuz to send oil from its eastern fields to the Red Sea.  This morning, there is hopium that Saudi Arabia could repair the pipeline soon.  In our analysis, prudent investors should note that technical hurdles remain and Houthis can attack the pipeline again at any time.  
• President Xi of China will be meeting President Trump.  Secretary Bessent says he has had productive talks with his counterpart ahead of the summit.  In our analysis, prudent investors should note that there are tough issues regarding Taiwan, trade, and AI.  Irrespective of this morning’s hopium, China is going to continue its quest to get ahead of the U.S. in AI and to replace the U.S. as the world’s superpower.  
• Bitcoin jumping over $85K is creating significant positive sentiment that is resulting in buying in tech stocks.  In our analysis, a large number of investors who aggressively buy bitcoin also aggressively buy speculative tech stocks.  Further, prudent investors should note the jump in bitcoin is primarily the result of a short squeeze.  Short squeezes tend to end.  
• President Trump has been wanting to make Greenland part of the U.S.  Now, the matter has been resolved.  There is a deal that falls short of a takeover but allows the U.S. to expand its military presence in Greenland and permanently bars China and Russia from investing in Greenland.  Shares of Greenland related stocks such as Greenland Energy Co (GLND), Greenland Mines Ltd (GRML), and Critical Metals Corp (CRML) are jumping.
• Anthropic’s IPO now appears to be scheduled for November.  This is generating additional enthusiasm for AI stocks.
• Nasdaq quarterly rebalancing that takes effect today increases Space Exploration Technologies Corp (SPCX) weighting to 2.82% from 1.28%.  This is causing index funds to buy SPCX stock.