4/4/26 Recap

The SPY gapped down huge thursday and completely reversed it. I think traders were pricing in the fact that Trump would most likely back off his deadline of monday April 6th to really hit Iran hard. Why wouldn’t they price that in? To this point he’s been a series of threats where he always backs off at the last second, same as he did last year with the tariffs where that reporter coined the TACO term of Trump Always Chickens Out. Still, we have not crossed the 21 ema in over a month now, our last day over it was the last session of February right before the war began. If Trump extends the deadline monday we likely will see a rally but we still have a major problem and are still below the 200 day for 11 sessions now. The 50 day(yellow line) keeps sloping down and we’re not too far away from a death cross where the 50 crosses down through the 200 day. Even if we get a bounce here in stocks, something has to give in the coming weeks, oil popped 12% yesterday and if oil sustains up here for any prolonged period it is going to cause havoc in our inflation numbers. I think the complacency from everyone is alarming but I get it, over the years, Trump always figures out a way to save stocks in a hurry from Covid to the 2025 Tariff Tantrum but in order to do so here, he has to get oil to fall in a hurry and that is easier said than done with the supply disruptions we’re seeing.

On a longer term look, we bounced last week because 6 weeks in a row red is a really uncommon thing. The last time we did it was the 2022 recession where we had 7 weeks in a row red on the SPY. Before that you would have had to go back to the depths of the GFC to June 2008 to the last time the SPY had 6 straight red weekly candles so we were pushing into some rare air last week if we had another. We still remain below the 8 week so there is nothing in this chart that suggests an uptrend until we close over that 8 week for the first time. Last year it took one close over the 8 week and we were off to the races.

Even right now the overall market being ugly doesn’t mean everything is a do not touch, there are many great stories still unfolding in the market. It is just tough because when markets get weak like this, it is very hard to impress investors, you have to have a story that surprises to get people’s attention in this tape. Look at Intel last week, they shocked everyone by buying back their stake in a foundry because their CEO had previously said he would not do so unless he saw the demand rising, so that move last week told investors big demand was coming and they sent it up 20% in 2 sessions to end the week. That is a name that is clearly a leader up almost 30% this year as the Nasdaq is down 5% YTD. Stories like AMZN or NVDA are great, but they’re known, and there are no surprises there to get investors excited in this tape. The story remains the same outside tech, things like energy, chemicals, materials, and utilities have been the place investors have gone to hide. Is this forever? No, without tech we really don’t have a market and later this year you’ve got multiple big IPO’s coming with Space X kicking things off which will get tech investors excited again. We really need a resolution to this war before the tech trade returns because right now investors are having flashbacks to 2022 and what that war did to inflation which ravaged the market. Trump keeps telling us 2 to 3 more weeks, if that’s the case, things have a chance to be ok, if not, we’re in a lot of trouble.

Stick to pockets of strength if you can, on any pullback those will be the first names bought, like INTC. I actually turned my INTC Strangle that I had into a risk reversal yesterday with a call spread by just adding some calls to it. The thesis changed dramatically this week and INTC was my top name all year so I had to get more involved yesterday after it broke out for a second day in a row. Just remember even if a market is weak, there is always something being bought, it is very visible in a chart.

This week’s best idea had a massive risk reversal placed yesterday and I want to highlight it and look at some various options to scale into this name at levels it has not seen in over a decade.