4/2/26 Longer Term Caution Is Warranted

I wanted to get a premarket note out today instead of a recap because of what happened last night. I will include a link to the database below that will be functional till monday morning at the open but we have to discuss the implications of last night and what it means going forward.

Trump came out last night and said nothing new in his primetime address meaning monday, April 6th, is still his deadline for a deal. If Iran does not make a deal by then he has promised an escalation that cannot be reversed by hitting their electrical plants and possibly their water plants. Iran has previously said they would strike similar properties in the gulf states. This would cause a ripple effect that nobody wants to even imagine in terms of human suffering. Is he going to actually do is the question and honestly, I don’t think anyone knows. It genuinely doesn’t seem like Iran wants to make a deal, he has been telling us they do for 33 days, and they just don’t seem to care. Last night they fired more rockets all over the place and do not seem to care about the things Trump is telling them. This is a complete mess right now because Trump said last night they have nothing left but for some reason we need to keep bombing them for 2-3 more weeks. That was contradicting statement. Then as far as the Strait of Hormuz goes we have completely pivoted from wanting to control it to Trump telling those who need it to go and take it. I am so confused right now on what comes next and I genuinely hope this is all part of his plan of action because he keeps changing deadlines and objectives on everyone.

As for charts, right now premarket we are back below the 8 ema on the daily chart which is back to weakness. With a long 3 day weekend coming up, I imagine there are going to be very few people willing to go long into the close with who knows what coming over the Easter holiday. With that said I want to look at a longer term chart and discuss some things with you that are really concerning to me right now. Below is the SPY monthly chart from the last decade. What you will notice below is every time we have closed below the 8 month(dark blue) we touched the 21 month(light blue). The 21 month currently sits at 621.19 which is around 4% lower than we sit at this moment with the big gap down. So it would be very shocking if we did not go down to at least that level this time, that would be a first in a decade move if we didn’t. My bigger fear is that 50 month moving average below(yellow line) at 519. We have had 6 breakdowns of the 8 month in the past decade and 3 of them have lead to a move down to the 50 month and I’m not including last April where we got very close and did not touch it, that means a 50% chance here exists that we move down another 20% to actually touch it. I mentioned yesterday we also had a bearish engulfing on the quarterly chart, just don’t be complacent, we have a real big problem right now.

Now again this isn’t meant to scare you, this is just meant to be a look at chart because historical parallels come into play often. Like how I mentioned a couple weeks back that the 8/21 week was seeing a cross down on the Nasdaq and that only happened 3 times since 2020 and all were followed by nasty moves down which we got this time too. Currently, if history is a guide, there is a 50% chance we drawdown to the 50 month and in the current climate where nobody knows how far Trump is escalating the war and what it means, it makes sense we’re facing that threat. We all know what prolonged war means, it means inflation, higher rates, consumer spending declines all things that would be a mess for us economically at home. The question now is can Trump get us out of this and have oil fall fast enough to where it doesn’t ripple through our economy with a vengeance? If last night’s speech was any indication the answer is oil is up nearly 8% today to 108+ premarket and potentially having it is having its highest daily close in years today if it doesn’t reverse. To say this is a nightmare scenario for Trump after he probably wanted to calm markets down with his speech would be an understatement because the Nasdaq is also down nearly 400 points. Will we be fine longer term? Yes we always are, but in the short term, we’re back below every key moving average and Trump did nothing to calm markets down last night, markets seek clarity and he is giving us none right now.

When does the pain end? See that light blue line below, that is your 21 ema and the chart below is the massive selloff in April last year. See how we had 1 tiny close over the 21 ema and then continued lower? That was a headfake, you want to see multiple closes over the 21 ema like we got in mid April before really going long. You want to see momentum building and right now we don’t have a single close over the 21 ema since this war began but that’s ok the same thing happened after the early April tariffs were announced in 2025. Once we cross that 21 ema, you now can set your stop back below it. This is why the 21 ema is the most important line to me, it is your short term barometer of things.

Go back to the covid crash in 2020, once we broke the 21 ema to the downside in mid February, we never once reclaimed it until we bottomed in early April. It took a month and a half to get that and that was it, a real bottom was in. So with everyone trying to call bottoms today, I am telling you, we do not bottom ever until we start building over the 21 ema, keep that in mind.

Bottom line, we are in a major pickle right now. We basically have 2 options right now, a bloody ground invasion to assert dominance or we leave now and the petrodollar is at risk. I’ve mentioned this before, we can decimate Iran militarily which we are doing but it does not matter because they’re hunkering down and hurting us economically. $108 oil is enriching them as they’re selling more oil than ever now and also collecting tolls on ships passing Hormuz while we are suffering at home with higher costs. If we leave right now and they control Hormuz, they will generate billions a year and we’ve enriched them. That would be a disaster but I’m not sure Trump has a choice because a long ground invasion would be wildly unpopular and he’d probably cost his party midterms and the 2028 election. He is stuck and you can tell by how many times a day he has to reassure us that we are winning with every speech and post. We have 100% set them back years, but we have different objectives in the war than they do and for them it is clear that sinking our markets is how they feel they will “beat” us. It then becomes a game of chicken and who blinks first. I guess the only thing all of us can do is wait and see what our leaders have planned for us. The charts are the charts and you will see the end of the war and recovery in them when it happens just like we did during covid or the tariff crisis. I hope you all enjoy your long weekend and I will see you sunday with a best idea.

Here is the link to the database for the weekend. I will still be updating this throughout the day, I just wanted to get out a premarket note about the market move this morning after his speech last night and where we stood now.