Power Hour #8: Two Pockets in a Broken Market: Energy, Software, and the Iran Binary – Thursday 3/5/2026

Right now, 371 bears are staring down 100 bulls in this market, and even the so-called safe havens are getting sold. One unconfirmed report about an oil tanker in the Persian Gulf just erased every gain the stock market made in 2026. Tonight, we break down what's real, what's noise, and the two pockets where institutional money is quietly hiding while everyone else runs for the exits. Okay, so let's just start with how about this actually was today, because... It was brutal. The headline numbers don't tell the whole story. S&P down 1.2%, Nasdaq down 1%, Dow down almost 2%. But here's the thing that really gets me. All major averages are now negative year to date. The entire 2026 rally, gone. Gone. And it's all because of this unconfirmed Iran tanker report. I mean, think about that for a second. One headline that may not even be true just wiped out months of gains. Right. And crude oil is up 6.5% to almost 80 bucks. That's 37% year-to-date now. 37% while stocks are red for the year. That divergence tells you everything about where the real inflation story is hiding. And speaking of inflation, did you see the unit labor costs number? Oh man, that was ugly. 2.8% versus 0.2% expected. That's not a miss. That's a different universe. It's like showing up to a spelling bee and they hand you calculus problems. Exactly. So you've got geopolitical risk spiking oil, you've got wage inflation coming in hot, and the market's sitting on stretched valuations. It's like a perfect storm. But the headline numbers only tell half the story. To understand how bad this really is under the surface, you have to look at breadth. And what we're seeing there is close to historic. Yeah, only 35% of stocks are above their 20-day moving average. 35 That means two of the market is already in short downtrends And sentiment 120 bulls versus 371 bears That not just bearish that near capitulation Fourth percentile reading. You have to go back to the worst 4% of all historical readings to find a crowd this gloomy. So here's my question. When the crowd is gloomier than 96% of all historical readings, is that a red flag or is that actually the setup contrarians dream about? That's the million-dollar question, right? And honestly, I think it depends on whether the selling is exhausting itself or just getting started. Right. The Russell 2000 down 2.7% versus large caps at 1%. That's not retail panic. That's institutional distribution. The big money is hitting the exits, and they're dumping small caps first. It's like a crowded restaurant when someone shouts fire. Exactly. The small tables near the exits get trampled first. Small caps and cyclicals are those small tables today. Okay, so if nearly everything is broken, where is the money actually going? because there are two sectors today that are telling a completely different story. And one of them you'd expect, and one of them might surprise you. Energy is the obvious one. The only green S&P sector today, up 0.2%. It's like the one student who studied for the exam everyone else forgot about. And the momentum is real. Energy ATR at the 84th percentile. This isn't a dead cap bounce. So what's the level map on crude? 75 is the bullish for equity support floor. 82 to 83 is where inflation fears really start to accelerate. And if Iran escalates, we could see 85 to 90. But here's the thing about holding oil into the weekend. Don't do it. Right. Geopolitical spikes often see profit taking on Fridays. Nobody wants to hold that exposure over two days of closed markets. It's like leaving a campfire unattended. It might be fine, but the downside scenario is dramatic. Energy making sense on a day like this That the expected story But the unexpected story is what happening in software And this one genuinely surprised us Dude the iShare software ETF is up 1 on a day the NASDAQ is down 1 That kind of divergence doesn't happen by accident. Into up 6.5%. ServiceNow up 6.1%. Salesforce up 4.7%. And look at the volume. It's not crazy elevated. This is steady accumulation. not a short squeeze. So who's buying and what do they know? I think it's the defensive growth rotation. In a risk-off environment, large-cap software with recurring revenue and pricing power becomes a hide. And then you've got STEM, EPS up 84% quarter over quarter, DAP holding in a down tape. That's the textbook episodic pivot. It's like a sprinter running a personal best into a headwind. Right. The underlying strength is undeniable. ADP up 2.3% with 2.3 times volume confirms the theme. Software holding in a down tape is like a restaurant staying packed in a rainstorm. The demand is real, not fair weather. Exactly. So we have two pockets working. Now let's look at what's getting absolutely destroyed. Because understanding the carnage in industrials and healthcare tells you something important about how serious the selling really is. Industrial's ATR at the 0th percentile, literally the lowest in the entire data set. Delta down 6.7%. Airlines are getting hit from both sides. Oil costs up, travel demand fear down. It's like being squeezed from both ends of a tube. But healthcare is what really worries me. Down 2.26% with a new data set low ATR. When even the traditional safe haven is selling off hard? This is not sector rotation. institution institutions are raising cash across the board Not just the people near the back everyone Which brings us to tonight because how you manage the next 16 hours may matter more than anything you did today The Iran tanker story is unconfirmed and that ambiguity is the most dangerous condition for overnight positioning Because confirmation or denial will move markets violently in either direction. So it's ABC time. Always be in control. Walk me through the two scenarios. Scenario one. Iran de-escalates or the report is denied. is denied, you get a violent short covering rally, especially in the names that held up today like software. And scenario two? Iran escalates or confirms. Crude hits 85 to 90. Inflation fears reprice rate cut timelines, and the breadth picture gets materially worse. So what's the practical playbook? Tight stops, reduced size, only trade the two pockets that are actually working, energy and software, and watch whether software names hold their gains into the close. The last hour is the market's poker tell. Trading into an unconfirmed geopolitical headline is like driving fast in dense fog. The road might be clear, but the cost of being wrong is catastrophic. Don't be a hero today. Let me leave you with the one thing you need to carry into tomorrow. In a market where sentiment is at the fourth percentile, breadth is devastated, and a geopolitical binary is unresolved overnight, the only edge is discipline. Two pockets are working, energy and software, and the institutional fingerprints are clear. Everything else is noise until the Iran story resolves. Stay disciplined, stay sized down. Watch two things before Friday's open, whether crude holds below 82 to 83 and whether the software names that surged today, Intuit, ServiceNow, Salesforce, open with continuation or fade. Those two data points will tell you everything about whether today's divergence was institutional conviction or a one-day anomaly. Be in control and we'll see you on the other side of the binary.