Defense Sector Soar on Geopolitical Tensions

The S&P 500 fell back below 6000 in the previous session, but year to date the index is up by about 2%.

Now on this day, all eyes are focused on the Middle East as geopolitical tensions take center stage.

The White House says the US isn't joining Israel's attack on Iran for now, despite a growing military presence in the region.

Well, the Pentagon calls the buildup defensive, but it could position the US to join Israeli strikes or pressure Iran to back down.

Joining me to weigh in this morning.

On how this is affecting the markets is Larry Tentarelli, the chief technical strategist at Blue Chip Daily Trend Report.

Good morning, Larry.

Thank you so much for joining me.

So first and foremost, let's get straight to defense with a look at the sector and zoom in on Raytheon.

So the global ex-defense tech ETF is up by over 55% year to date.

This does come as the military buildup intensifies in the Arabian, Mediterranean, and Indian Sea.

So tell me about the bullish tailwinds here.

So defense is in a very bullish uptrend right now.

So as you mentioned, Raytheon is a sector leader.

It made new all-time highs yesterday.

So you really have two bullish tailwinds right now.

Number one, where the uh the Golden Dome missile defense system that was announced last month, and then also obviously the Middle East developments have both created bullish tailwinds for that sector.

And Larry, I do want to take a look at nuclear energy.

Last month, Trump announced for executive orders to boost the industry, aiming to modernize regulations as well as speed up reactor testing and deploy reactors for nuclear security, not to mention strengthening the nuclear industrial base.

So tell us about Cameco and do you think there's more room to run for the uranium uranium mining name here?

I do.

Nuclear is very bullish right now, and you've got two things.

So nuclear was bullish before the executive orders last month.

Nuclear is an AI data center theme, and then also with the orders that were signed last month to quadruple nuclear capacity.

You really have two strong forces at play.

So Camico is the world's largest publicly traded uranium stock, and uranium is the fuel for nuclear.

So if you're bullish on nuclear, you really have to be bullish on uranium, which we are, and Camico just broke out of a very, very long term price base, and it looks to have a very long runway right here.

And Larry, sticking to the bullish theme here, let's take a look at gold as well as Bitcoin because as we all know, the precious metal and that crypto major are outperforming the major stock averages year to date.

So what are some of the potential risks to the momentum when it comes to gold and Bitcoin?

So gold and Bitcoin, I think we have to look at each individually.

So gold really has been a weak US dollar play.

The dollar's been very weak all year, and as the dollar continues to trend lower, gold has continued to break out.

Gold has a few things working for it.

Obviously the weaker dollar.

Which could continue.

The dollar is oversold right now, but the long term trend for the dollar is lower.

It's higher for gold.

But also, as long as we have fiscal stimulus concerns, we've got debt concerns, as long as those things are in the market, I think it's very bullish for gold.

Bitcoin, long term uptrend, and that's also considered an alternative asset versus the dollar.

And building on that theme that you just mentioned there, of course today is that day.

After two days of deliberation, FOMC officials will be announcing their rate decision as well as publishing their summary of economic projections.

So we have been seeing choppy trading.

For the S&P 500 as well as the Nasdaq 100 in the past several sessions, and this does of course come amidst all the geopolitical tension we're seeing in the Middle East.

So what are some technical levels that you're watching for both the S&P 500 and the Nasdaq 100?

So both of them are very bullish.

They're in confirmed weekly uptrends over rising 10 week and rising 40 week moving averages.

For the S&P 500, 6000 was a key breakout level.

I always expect some type of a pullback or consolidation, but in the short term, I'd want to see the S&P 500 stay over 5800 on any type of a pullback, and I've been surprised really how well the S&P 500s held up with all of the Middle East news that we've held over the past week, but they are in confirmed weekly up trends and 5800 to 6000 on the S&P is a key support level.

And finally, before I let you go, we have to keep in mind that tomorrow is a market holiday here in the US for Juneteenth, but at the end of the week, we do have the S&P 500 rebalancing as well as the triple wing event.

So what are you paying attention to as we return from the Fed decision and enter into Friday's trading session?

I would expect some short term volatility and chop, a little bit like what we saw yesterday whenever you've got options exploration, it tends to lead to wider trading ranges, but I do think that any pullbacks or consolidation that we see.

Will be viable in some of these stronger themes.

The S&P, NASDAQ 100, the technology sector, there's quite a few strong stocks and cybersecurity and semiconductors.

So with it being a holiday and options exploration and the Fed, it opens us up to some short term volatility, but I would look to add to best ideas on any pullbacks.

OK, Larry, well, we will have to leave it there, but thank you so much for joining us in Midweek Trade and as always, thank you for sharing your insights.

Thank you, Remy.