I’ve Seen This Movie Before: Iran, Election-Year Trouble and a Market Trading Headline to Headline

I say this quite often, and I have to say it again: the markets remain very fluid. I don’t think I have to go through the laundry list again, but what I can say is it’s not shrinking, and despite all that, the geopolitical scene isn’t improving. In fact, it’s deteriorating.

I remember November 4, 1979, when Iranian students stormed the U.S. embassy and held 52 American hostages. I also remember the backing of the Shah of Iran fleeing the country in 1979. It was two years after I graduated high school and started my career on the trading floor. Every day, the news would say day 10, day 30, day 50, day 100, day 150, day 200, all the way up to day 444, until Iran released the hostages on January 20, 1981.

Not all, but many Iranians opposed the Shah because of his authoritarian rule, repression, corruption, inequality, rapid Westernization, and close ties to the United States. I remember being on the floor of the Chicago Board of Trade, and oil prices doubled between April 1979 and April 1980, gold rallied to $400.00 in 1979 and rallied up to $835, silver rallied from $15.00 to roughly $49.00, and the S&P, which initially sold off, rallied 13.3% in 1979 and 25.8% in 1980, despite a recession, skyrocketing inflation, and high interest rates.

We all know Iran is claiming it won the war, but I don’t believe that. The U.S. inflicted massive damage to the country’s infrastructure and military, but as we all know, Iran has been preparing for a war with the U.S. for over 40 years, and back in 1980, the crisis dominated the Carter–Reagan presidential race.

Iran kept the hostages through Election Day and released them immediately after Reagan’s inauguration, politically humiliating Carter. That episode popularized the term “October surprise,” a late event capable of changing an election, and now Israel’s election is October 27 and the U.S. midterms are November 3. Based on Iran saying they are going to go on the offensive, there is speculation that Iran could provoke a crisis shortly before those elections.

There is an old saying that history repeats itself, and today, that is what it looks like.

Our View

Just because the markets are closed doesn’t mean the level of headlines goes down, and the top one from over the weekend is:

• “Iran’s top politicians said the country must focus on ending the war and shoring up its economy, pushing back against hardliners.”

I honestly hope this is true, but I don’t think the top politicians run the country anymore. I think the Islamic Revolutionary Guard Corps (IRGC) exerts far more real power than the elected politicians. Here is a great story by PBS that lays out the workings: The Structure of Power In Iran

The week ahead includes 15 economic reports, with the top ones kicking off Wednesday at 8:30 AM ET with three major releases—the 2nd Estimate GDP, the PCE Price Index / Core PCE, and Durable Goods Orders—followed by Weekly Jobless Claims on Thursday at 8:30 AM ET.

As of Friday, August 21, 468 of the 500 S&P 500 companies, or 93.6%, have reported Q2 earnings, with 32 companies remaining; of those that have reported, 84% beat EPS estimates and 76.9% beat revenue estimates, while reported earnings are up 40.6% YoY and revenue is up 14.1% year over year.

There are some big names reporting earnings this week, but the elephant in the room is Nvidia (NVDA) after the close on Wednesday. According to Goldman Sachs, which remains bullish on the company, the latest estimates show:

• Q2 FY2027 Revenue: Goldman forecasts $87.68 billion (roughly 3% above broader Wall Street consensus of ~$91.9B–$92B).

• Q2 FY2027 EPS: Goldman models $2.05 (compared to consensus of $2.08).

• Data Center Revenue: Projected at $82.13 billion for the quarter.

• Non-GAAP Gross Margins: Expected around 74.9%.

Bottom line: Goldman’s estimates appear slightly more cautious than the Street, particularly on total revenue and EPS.

The index markets feed off headlines like the top Iranian politicians saying they need to focus on ending the war. I am writing this on Saturday afternoon, and I’m sure by the time the markets open on Monday, there will be other headlines repudiating it.

Our lean: The key to the direction of the ES and NQ is simple: the bonds and crude oil. Oil up and bonds down, you sell the rallies; oil down and bonds up, you buy the pullbacks/weakness. I know it sounds too easy, but pay attention to the lower highs and higher lows that usually occur after the gap opens and the 11:00 time frame.

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The MOC opened with a modest $409.1 million buy imbalance, backed by $3.6 billion to buy versus $3.2 billion to sell. The dollar lean was +53.0% and the symbol lean +52.8%, with 362 stocks to buy against 323 to sell. That was a rotational opening, not a broad institutional buy program.

The tone changed immediately. At 15:52 the imbalance flipped to -$310.0 million, then expanded to -$952.0 million at 15:53 and -$1.1 billion at 15:54. Selling accelerated late, reaching -$1.7 billion at 15:56 and peaking at -$1.8 billion at 15:57. The dollar lean reached -65.7%, just shy of the -66.0% threshold that would signal a more wholesale market sell. The symbol lean was only -55.5%, showing that the pressure was concentrated more heavily in dollars than across the full list of stocks.

Sector action reflected that rotation. Consumer Staples was the standout buy with a +72.1% dollar lean, clearly above the wholesale-buy threshold. Industrials leaned +61.1%, while Financials were +56.2%. Communication Services was the strongest meaningful sell sector at -69.4% dollars and -63.2% symbols. Information Technology was mixed at -53.0% dollars but +54.3% symbols, suggesting large-cap selling against broader stock-level buying. Energy leaned -54.0%.

The largest buy imbalances included NVDA at $175.0 million, XOM at $158.7 million, SNDK at $148.6 million, KO at $121.1 million, UNH at $105.4 million, and MCK at $105.1 million. Major sells included CSCO at $145.5 million, AVGO at $121.3 million, ADI at $110.3 million, MPC at $84.3 million, CVX at $80.2 million, and GOOGL at $71.4 million.

By 15:59, the MOC still showed -$1.2 billion, confirming that a small rotational buy opening had transitioned into concentrated late-day selling. Basic Materials printed -100.0% on both measures, but with only one symbol, it carried little breadth significance. The 16:00 auction ultimately cleared near flat at +$1.0 million.

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