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Situation Awareness
Situation Awareness: Cautious Bearish. Markets are on the defensive amid escalating geopolitical tensions and rising oil prices. Major averages remain capped below their 200-day moving averages, signaling resistance despite recent rally attempts. Trade mode: selective and defensive. The market is reacting to the inverse scenario of yesterday, with crude oil spiking and yields increasing, overshadowing any potential resolution in the Iran conflict. Regime context — 28.35% of stocks trade above their 40-day SMA, and the 4% Bull/Bear gauge shows 274 bulls vs. 92 bears. The 5-day trend shows a choppy descending sequence ending today on a very slight uptick, reflecting a weak recovery attempt.
SIP: OLPX KOD NAVN ADMA
- What’s working: Gapping stocks on earnings and M&A news are showing the strongest relative strength.
- Leading sectors: Energy (5.08), Utilities (0.68), Communication Services (-1.61); leading themes: None reported — market closed, so using Sector Volatility (ATR) data instead
- Geopolitical risk is back at the forefront as Iranian officials refuted reports of negotiations with the U.S., driving oil prices up.
- Yesterday’s tape saw stocks rally on retreating oil prices, but gains were capped by 200-day moving averages, highlighting overhead resistance. This morning’s reversal in oil implies yesterday’s move was a bear trap.
- DEP watchlist: BRZE CHWY CORT JD LUNR
- SIPS: TLS ABSI WAT ARES
Today’s Market Narrative
Equity futures are pointing toward a lower open this morning, reversing yesterday’s gains fueled by optimism surrounding a potential resolution in the Iran conflict. This morning, the narrative has shifted back to geopolitical concerns, with crude oil prices surging nearly 4.0% to $93.85 per barrel and yields rising 5-8 basis points across the curve. The S&P 500 futures are down -57 points at 6584. This is amplified by negative news out of Asia and Europe also dragging down US Equities.
Yesterday’s rally was tempered by reports that Iranian officials denied any negotiations with the U.S. are underway. The Wall Street Journal reports this morning that Iran continues to attack energy infrastructure sites in the region, leading to heightened tensions and increased military presence in the area. This renewed geopolitical uncertainty has overshadowed any positive sentiment from yesterday’s retreat in oil prices.
The major averages remain pinned below their respective 200-day moving averages, suggesting that single-day retreats in oil are insufficient to push them back above this key technical level. Choppy market action is expected to persist as the conflict unfolds without a clear resolution in sight.
Corporate news flow is relatively light today, with the market’s focus primarily on macro factors and geopolitical developments. The main economic data point of note will be the weekly initial jobless claims report, though it is unlikely to alter the downbeat market sentiment.
Macro & Policy
The market is grappling with a disconnect between the Fed‘s projections and market pricing, as highlighted by Briefing.com’s “Big Picture” analysis. The expectation for rate cuts has been pushed out, and the risk of a rate hike is rising, driven by persistent inflation and the recent energy price shock. The 2-yr note yield has spiked 52 basis points this month to 3.91%, reflecting diminishing rate cut expectations. The 10-yr note yield is up 42 basis points to 4.38%, fueled by escalating inflation concerns.
Rising global yields and weaker Treasury demand tighten financial conditions, threatening growth, valuations, and fiscal stability. The Iran war, with its impact on oil prices, exacerbates these inflationary pressures for central banks worldwide. Longer tenors trimmed early losses but shorter durations are still facing headwinds from rising yield. Initial jobless claims came in at 210k which confirmed the tight labor market.
Economic Calendar Today
- 08:30 ET: Initial Claims for Mar 21 — Expected: 210K | Prior: 205K — Reinforces the tight labor market, reducing the likelihood of near-term rate cuts.
- 08:30 ET: Continuing Claims for Mar 14 — Prior: 1857K — Further confirms labor market strength
- 10:30 ET: EIA Natural Gas Inventories for Mar 21 — Prior: +35 bcf — Potential impact on energy prices.
- Earnings reporting today (pre/post market): DOO, CMC, LOVE, SCVL / AGX, BTGO, OXM — No reports with strong setup significance.
Earnings & Corporate News
Jefferies (JEF 39.00, -0.64, -1.6%) reported earnings of $0.70 per share, which may not be comparable to the FactSet Consensus of $0.89, and missed revenue expectations. The stock is gapping down. Lovesac (LOVE) beat earnings by $0.20 and revenues, but guided Q1 revenues below consensus, and the stock is trading slightly higher. Other notable earnings include BRP Inc. (DOO), which beat on both EPS and revenue.
There is growing focus on externalities across social media companies after a judge found Meta Platforms (META 585.83, -9.06, -1.5%) and Alphabet (GOOG 286.09, -3.50, -1.2%) liable in a landmark social media addiction case.
Analyst upgrades include Airbnb (ABNB) upgraded to Hold from Sell at Truist, and Arm (ARM) upgraded to Buy from Hold at Needham. Downgrades include Adma Biologics (ADMA) downgraded to Neutral from Overweight at Cantor Fitzgerald impacting the stock negatively gapping down 15.9%.
WaveFinder Signal Summary
The WaveFinder signal environment reflects the cautious market tone. While the Sentiment 4% gauge suggests some bullish undercurrent, the low percentage of stocks above their 40-day SMA (28.35%) indicates limited breadth. Continuation signals are moderate, and the market will most likely be defensive.
Top setups worth watching include NKLR and DTIL from the continuation scan, signaling possible short coverings.
Breadth remains constrained as the percentage of stocks above their 40 SMA is showing continued weakness.
Today’s Watchlist
- BNO — Oil prices are rising due to heightened geopolitical tensions, presenting a potential catalyst.
- OLPX — Acquisition announcement provides a clear upside catalyst; look for continuation. 2LYNCH is a possible setup.
- NAVN — Better-than-expected Q4 results and guidance; potential for a continuation breakout. 2LYNCH.
- ADMA — Downgrade catalyst could trigger a significant downside move if selling pressure intensifies.
- DTIL —Strong continuation setup today in Medical sector. RVOL very low at 0.1.
Action Codes of the Day
CRT Controlled Risk Taking — With geopolitical risks and choppy market action, a considered approach is warranted. 28.35% of stocks are above their 40-day SMA, showing a weakness in the market.
COUGAR Patience play — With the Iran conflict still unresolved, a longer wait may be needed to better understand the underlying catalysts facing the market’s recent down-turn.