Situation Awareness
Situation Awareness: Cautious. Market sentiment is mixed as geopolitical jitters and rising oil prices offset positive earnings reports, leading to a cautious downtrend. Indices are trending lower from record highs. Trade mode: selective and defensive. Renewed U.S.-Iran tensions in the Strait of Hormuz and mixed sector performance are weighing on sentiment. Regime context — 74.79% of stocks trade above their 40-day SMA, and the 4% Bull/Bear gauge shows 158 bulls vs. 93 bears. The 5-day trend shows a consistent up sequence, but the current sentiment gauge is extremely low at 4%.
SIP: MODD PASG SIDU NKTR
- What’s working: Continuation signals show good breadth, Delayed 9M signals are plentiful, but Reversal setups are also present, indicating mixed market conditions.
- Leading sectors: Energy, Financials, Materials are strong; Consumer Discretionary, Communication Services, Health Care are weak according to Industry Watch. Sector Trending data is unavailable due to market close. But based on sector volatility we can see there is rising volatility in Technology (RSPT) and financials (RSPF).
- Key event: Uncertainty arises as the U.S. and Iran struggle to maintain their ceasefire agreement.
- Market read: Last week’s rally to record highs has paused as geopolitical tensions resurface, leading to a digestion phase with a downward bias.
- DEP watchlist: AFRM, BBWI, HIMS
- SIPS: AESI, AMPX, BE
Today’s Market Narrative
The major averages are moving lower this morning, reflecting a cautious tone following last week’s record-setting rally. Initially, the S&P 500, Nasdaq Composite, and DJIA edged lower. Overnight, the risk-on sentiment Friday was challenged by renewed uncertainty around the U.S.-Iran conflict, with maritime activity in the Strait of Hormuz testing the ceasefire. Currently, the averages remain off their session lows, but broader market sentiment remains mixed.
Tech mega-caps began the day with underperformance and are still a drag on the broader market, as the communication services and consumer discretionary sectors faced early selling. However, energies showed better performance. The Dow is currently off -0.12% at 49387.91, the Nasdaq declined -0.68% to 24300.95, and the S&P 500 is down -0.43% at 7023.01.
Energy prices are higher this morning, with WTI crude oil futures up this morning, impacting oil-sensitive segments like cruise lines. Investors appear to be weighing geopolitical risks against the backdrop of the first-quarter earnings season, which is set to intensify this week. Corporate headlines are also influencing individual stock movements, adding to the day’s idiosyncratic behavior.
Macro & Policy
The bond market is reflecting the day’s uncertainty, with U.S. Treasuries trading near their session lows after an initial bounce. Overnight, the 10-yr note yield saw modest movement in response to overnight reports, sitting at 4.26%, up +2 bps this morning. The market is carefully balancing renewed geopolitical risks with last week’s gains and is showing strength in handling renewed uncertainty.
A key factor currently is the potential disruption of energy supplies stemming from tensions in the Middle East and the potential effects on inflation and interest rate policies. Economic data released overnight from China was neutral, leaving the focus on geopolitical headlines. All eyes are glued on how the U.S. and Iran navigate ceasefire talks, especially related to shipping in the Strait of Hormuz.
Economic Calendar Today
- No major U.S. economic data releases today, leading focus to be on geopolitics and corporate earnings.
- Earnings reporting today (post market): TSLA — expected EPS (unavailable), significant mega-cap tech release.
- Senate Banking Committee to consider Kevin Warsh’s Fed chairman nomination on Wednesday.
Earnings & Corporate News
Cleveland-Cliffs (CLF) is trading lower today, down -2.21% despite a Q1 EPS beat and revenue upside. Rising energy costs are overshadowing improving steel fundamentals, creating headwinds and dragging the share price down. Peer companies Nucor (NUE), up +3.49%, and Steel Dynamics (STLD), up +5.42%, reflected positively on improved steel prices and prices rose $55 dollars sequentially.
Tesla (TSLA) is a mega-cap laggard ahead of its earnings release Wednesday after the close; and United Airlines (UAL) is down after denying merger talks in the sector. Marvell (MRVL), up +4.11%, is in focus today following reports of a partnership with Alphabet (GOOG), down -0.56%, to develop new tensor processing units, which is also causing NVIDIA (NVDA) to drop 1.16%
QXO Inc (QXO) is sharply lower after announcing yesterday that it would acquire TopBuild (BLD) for $17 bln, valuing BLD at around $505 per share. Eli Lilly (LLY), down -0.44% today, takes a step back from headlines that say the company will acquire Kelonia Therapeutics for up to $7.0 billion in cash.
WaveFinder Signal Summary
WaveFinder shows a mixed scan environment. Continuation scans have plentiful signals (87), indicating strong breadth. Delayed 9M scans are rich with 97 hits, however Reversal scans are showing a high number (63), signalling a cautious market. Technology and financials are leading industries with rising volatility based on higher ATR.
Top setups to watch include names from both continuation and D9M scans, such as AESI and HIMS. Market breadth, measured by the percentage of stocks above their 40 SMA, is 74.79% compared to 73.92% yesterday, indicating a moderate expansion.
Today’s Watchlist
- AESI — 2LYNCH continuation breakout in the energy sector as oil prices rise amid geopolitical tensions.
- HIMS — D9M setup in the medical sector, high relative volume, positive article today on sector.
- CLF — Post-earnings dip despite revenue and EPS beat due to energy concerns; potential reversal if energy costs stabilize.
- MRVL — Partnership with GOOG to develop AI chips provides upside catalyst in the tech sector; potential 2LYNCH setup.
- TSLA — Earnings report on Wednesday, high volatility expected, potential for a significant move based on results.
- LLY — Acquisition of Kelonia Therapeutics for strong gains.
Action Codes of the Day
CRT — Controlled Risk Taking acknowledges the current market conditions where volatility in play between Iran and the U.S.; earnings numbers continue to cause a drag on markets.
T3A — Think 3 Days Ahead – As earnings season begins and there is a light economic calendar this week, earnings will be the single biggest market mover, especially in high-growth sectors like technology and healthcare.