Markets are so confused that they can no longer differentiate fantasy from reality. Donald Trump's declaration of a quick end to the Middle East conflict pushed the S&P 500 to its best daily performance in months. But how are we supposed to understand that in light of the Defence Department's reports of the most extensive bombings of Iran to date? Or with Tehran's refusal to negotiate with Washington? After trading most of March 10 in the green, the broad index closed the session in the red.

Daily S&P 500 dynamics

The main trigger for the S&P 500's roller-coaster was a post by US Energy Secretary Chris Wright claiming a tanker had successfully transited the Strait of Hormuz under US naval escort. The tweet was later deleted, and the White House issued a denial. No one is protecting oil suppliers — if that were the case, US ships would become easy targets for Iran. Meanwhile, news of an explosion on a tanker near Abu Dhabi pushed Brent and WTI higher. The broad stock index, by contrast, plunged.

Earlier, Donald Trump had threatened Iran with even more intensive bombing if it mined the Strait of Hormuz. But if Iran has no intention of negotiating with the US, why should it heed the American president?

For now, investors cling to equities, hoping US economic resilience will hold — arguing that the US is a net exporter of energy commodities and should therefore fare better than other countries. Yet accelerating capital outflows from S&P-500-focused ETFs suggest fear is prevailing. There are worries that GDP will cool materially over time. High oil and gasoline prices, high Fed rates and AI?driven displacement in the labour market are a toxic mix that drives money out of the US.

Capital flows into S&P-500-oriented ETFs

It doesn't matter whether smart money or the crowd flees faster. Retail investors make the same mistakes as the crowd: chasing hot profits, believing financial nonsense and panicking during declines. One could argue there is no smart or dumb money — there is simply money.

Before the Middle East conflict, the crowd intended to buy the dip while institutional investors sold into rallies. Today, both groups are in the same boat, reacting to developments in the oil market.

Technically, the S&P 500 daily chart formed a pin?bar with a long upper wick. It touched the moving average and bounced off dynamic resistance. These are all signs of bull weakness and a reason to sell on a break below the pin-bar low at 6,760. Conversely, a close of the broad index above the pivot level at 6770 would give bulls some hope.