Situation Awareness
Situation Awareness: Bullish. The market has shifted dramatically from cautious to aggressive breakout as a two-week ceasefire agreement between the U.S. and Iran sends oil tumbling and equities soaring. Trade mode: aggressive breakout. This morning’s sharp rally is driven by reduced geopolitical tensions and the subsequent collapse in oil prices, offsetting previous inflation concerns. 37.93% of stocks trade above their 40-day SMA, and the 4% Bull/Bear gauge shows data unavailable bulls vs. data unavailable bears. The 5-day trend (data unavailable).
SIP: AAPL DAL LEVI SMCI
- What’s working: Gaps higher are working this morning
- Leading sectors: Asia Equities, Japan’s Nikkei; leading themes: Two-week ceasefire between US and Iran
- Key event:U.S. and Iran’s two-week ceasefire agreement, allowing safe passage through the Strait of Hormuz.
- Market read: Yesterday showed tight range-bound trading ahead of the Iran deadline. That caution has now reversed into aggressive buying.
- DEP watchlist: ENVX, SPCE, LUNR.
- SIPS: AA, ARGX, KEYS, CRWD.
Today’s Market Narrative
Equity futures are surging this morning, fueled by the news of a ceasefire agreement between the U.S. and Iran. The agreement, brokered with the help of China and Pakistan, includes Iran allowing safe passage for ships through the Strait of Hormuz, which has sent WTI crude oil plummeting $19.64 (-17.4%) to $93.31 per barrel. This removes a major inflationary pressure point, allowing stocks to rally sharply after a choppy session yesterday where the market struggled ahead of an Iranian deadline. European and Asian markets are following suit, with major indices showing strong gains.
The focus is squarely on the geopolitical front this morning with the markets reacting significantly to de-escalation. Energy stocks are naturally under pressure, while tech, consumer discretionary, and other growth sectors are benefiting from the risk-on sentiment. This sudden shift highlights the market’s sensitivity to oil prices and the potential for rapid reversals based on geopolitical headlines.
The S&P 500 Futures are up +187 at 6,843, DJIA Futures are up +1318 at 48,130, and Nasdaq Futures are up +847 at 25,218. These significant pre-market gains suggest a strong opening for U.S. equities, with the potential for continued momentum throughout the day if the ceasefire narrative holds. Trader still have to digest VP Vance’s thoughts that it is “fragile truce”.
From a sector view, the energy sector is significantly lagging due to the decline in oil prices. Conversely, sectors that benefit from lower energy costs and improved sentiment, such as airlines (DAL), technology (AAPL), and consumer discretionary (LEVI), are leading the charge. Keep an eye on the follow-through from today’s gap-ups, as initial enthusiasm may give way to profit-taking or renewed concerns depending on the longevity of the ceasefire.
Macro & Policy
The market’s reaction to the ceasefire agreement underscores the significant impact of geopolitical events on monetary policy expectations. With oil prices retreating, concerns about inflation have eased, leading to a decline in Treasury yields. The overnight Treasury Market Summary shows the 10-year yield dropping 10 bps to 4.24% following this news. This easing of yields provides a more favorable backdrop for equities, particularly growth stocks that are sensitive to interest rate changes. The U.S. Dollar Index is also down 1.2% at 98.69. These moves are directly correlated to the shift in risk sentiment and the anticipated reduction in inflationary pressures.
The key point is that one party (US and Israel) can start a war, but it takes both parties to end it.
Economic Calendar Today
- 07:00 ET: MBA Mortgage Applications Index for Apr 4 — Actual: -0.8% | Prior: -10.4% — A smaller decline in mortgage applications points to some stabilization in the housing market.
- 10:30 ET: EIA Crude Oil Inventories for Apr 4 — Expected: NA | Prior: +5.45M — The data will reflect the state of oil inventories after the ceasefire.
- 14:00 ET: FOMC Minutes for March — Review of Fed‘s last meeting will provide insight.
- Earnings reporting today (pre/post market): DAL RPM APLD STZ PSMT
Earnings & Corporate News
Delta Air Lines (DAL) beat EPS expectations by $0.06 and beat revenue expectations, but guided Q2 EPS below consensus, which might temper enthusiasm despite the broader market rally. Levi Strauss (LEVI) beat by $0.05, beat on revs; raises FY26 EPS and revneue guidance; guides Q2 EPS and revenue in-line. LEVI is gapping up 10.7%. Apple (AAPL) is up +2.3% at 259.28 on news that its foldable iPhone is on track for a September 2026 debut.
The analyst community is also active, with Aehr Test Systems (AEHR) upgraded to Buy from Hold at Craig-Hallum, tgt $68. Conversely, Broadcom (AVGO) was downgraded to Neutral from Buy at Seaport Research and Coinbase (COIN) was downgraded to Underweight from Equal Weight at Barclays, tgt $140..
Additionally, Casey’s General Stores (CASY) will added to the S&P 500 prior to the open on Thursday, April 9, before pulling back modestly..
WaveFinder Signal Summary
The WaveFinder scans reflect the sudden shift in market sentiment. While yesterday’s scans were mixed given the geopolitical backdrop, today’s environment is dominated by gap-ups and increased volatility. The signal counts are rich for continuation setups. 36% stocks above 20 day SMA and 37.93% stocks above 40 day SMA. yesterday was 104% and 37.77%.
Top setups worth watching include: AA (Mining) and KEYS (Electronics). The market is volatile with a slight neutral bias..
Today’s Watchlist
- AAPL — Foldable iPhone news, continuation setup
- DAL — Q1 earnings beat, Q2 guidance mixed, benefit from lower fuel costs.
- LEVI — Beat-and-raise Q1 report, positive guidance, gapping up. 2LYNCH Setup
- CRWD — Continuation, driven by increased risk appetite.
- KEYS — Continuation 2LYNCH setup, gap
- SMCI — Up 5.3% due to investigations
Action Codes of the Day
- 2LYNCH The continuation signal is strong today thanks to a risk-on bid.
- CRT Controlled Risk Taking: with the volatility so high because of shifting opinions, CRT will come into play.