Briefing Morning Report
Energy markets are driving the narrative this morning as escalating hostilities in the Strait of Hormuz push oil prices surging 6.0% to $92.48 per barrel. Iran’s intensified efforts to halt commercial traffic through this critical shipping lane, including attacks on two oil tankers in Iraqi waters, have markets reassessing both the duration of this conflict and its inflationary impact. This energy shock is pulling equity futures lower across the board, with S&P futures down 33 points to 6746 and the Nasdaq off 114 to 24,870.
The oil spike is already reshaping Fed expectations, with markets now pricing at least 50% odds that the next rate cut won’t come until September. This represents a meaningful pushback from recent dovish bets, as higher energy prices threaten to reignite the inflation narrative just as the Fed was gaining confidence on disinflation progress. Overnight, Asian markets closed broadly lower with the Nikkei down 1.0% and European indices following suit, suggesting global risk-off sentiment is taking hold.
Market Health
Market breadth remains deeply concerning with only 195 bulls versus 125 bears on the 4% momentum indicator, while just 50% of stocks trade above their 20-day moving averages. More troubling, the percentage above 40-day averages sits at a weak 33.76%, indicating the recent market strength lacks broad participation. The 40-day sentiment reading remains bearish, suggesting the underlying trend hasn’t shifted despite recent rallies.
Sector rotation is accelerating with Energy RSPG showing exceptional strength at +4.54 (90th percentile), benefiting directly from the oil price surge. Meanwhile, Consumer Discretionary RSPD has collapsed to -1.24 (0th percentile), Healthcare RSPH sits at -2.20 (also 0th percentile), and Financials RSPF remain weak at -1.37. This stark divergence between energy and defensive sectors suggests investors are positioning for prolonged geopolitical tensions while rotating out of rate-sensitive growth names.
Strategy Signals
The 2LYNCH continuation scanner is firing on 59 signals, with notable energy plays leading the charge. SOC shows a powerful 15.1% gain with 3.2x relative volume, while PLUG demonstrates a clean 5.2% move in the hydrogen space. Healthcare names like CNTX (+8.6%) and MEDP (+2.3%) are also setting up, though the sector headwinds remain challenging.
D9M momentum signals total 99 setups, with HIMS leading at +10.3% on 2.6x volume, showing the telehealth space remains resilient. Energy momentum is building with PBR up 5.6% and EQNR gaining 3.4%. The reversal scanner shows 132 signals, though many appear in beaten-down sectors like mining (HMY -11.0%) and transport (BWLP -10.5%), suggesting potential oversold bounces rather than trend changes.
The 20% study highlights several ETF distortions, particularly NBIG and NBIL, both showing extreme moves that may represent structural opportunities. However, given the current energy-driven volatility, focus should remain on the clearest momentum plays rather than complex ETF arbitrage.
Today’s Watchlist
- SOC – Energy service company with explosive 15.1% move on 3.2x volume, riding oil surge
- HIMS – Telehealth leader up 10.3% with strong D9M momentum, defensive growth play
- PBR – Brazilian oil giant gaining 5.6% with institutional backing, direct energy exposure
- PLUG – Hydrogen play showing 5.2% continuation setup as energy transition narrative heats up
- CNTX – Biotech breaking higher with 8.6% gain, potential healthcare sector leader
Action Codes of the Day
ABC – Always Be in Control: With oil volatility spiking and futures gapping down, stick to predetermined risk levels and avoid chasing energy names that have already moved significantly.
CRT – Controlled Risk Taking: Energy momentum is real but dangerous – take calculated positions in quality names like PBR and EQNR rather than speculative plays, keeping position sizes modest given the geopolitical uncertainty.