Weekly Trader's Outlook

If you read the last week's blog, you might recall that I had a "Volatile" forecast for this week, citing persistent uncertainty around Iran and the trajectory of oil prices. Once again, it was another volatile week for stocks as developments related to the Iran war dominated the headlines. The market psychology appears to be hijacked by the Iran war, as stocks generally moving inverse of oil prices on a day-to-day basis. The main investor focus appears to be "how long" the war will last, and "how high and for how long" will oil prices remain elevated, given the potential impact on economic growth and by extension, corporate profits. For reference, WTI crude oil prices are flat on the week, currently trading around $98.81/barrel, but Brent crude oil is up ~10% this week to the current $112.61/barrel.

Outside of geopolitics, the Federal Reserve held one of its Federal Open Market Committee (FOMC) meetings on Tuesday/Wednesday and there was a relatively hawkish tone from Fed Chairman Jerome Powell. While the Fed's Summary of Economic (SEP) projections showed an upward revision to their future GDP forecasts, it was accompanied with slightly higher inflation expectations. Certainly, the impact of higher energy costs is a factor, but February's Producer Price Index (PPI), which captures data prior to the Iran conflict, came in hot for the second month in a row. Treasury yields have been climbing higher this week as yields on the 10-year are pushing up to a seven-month high today (more on this in the "Economic Data, Rates & the Fed" section below).

On the earnings front, DRAM & NAND maker Micron Technology (MU - $23.92 to $420.95) delivered a "beat and raise" quarter that was well above estimates on Wednesday, but the stock trading lower following the report.

At the time of this writing (2:50 p.m. ET) stocks are lower across the board and trading at the lows of the session (DJI - 500, SPX - 102, $COMP - 458, RUT - 60). News from this morning that the Pentagon is sending three warships and thousands of additional Marines to the Middle East is weighing on investor sentiment, but keep in mind that it's also a "triple witching" options-expiration Friday, which could be exacerbated the downside some. It's relatively light on the earnings calendar next week, though there is a monthly Personal Consumption Expenditures (PCE) Prices report, which is the Fed's preferred inflation gauge. However, at this juncture, it seems that oil prices and Iran headlines will primarily drive equity markets. Secondarily, technicals will likely have a part to play. I highlight this since the Relative Strength Index (RSI) on the S&P 500 is currently 29 (below 30 is considered technically oversold), and the S&P 500 Equal Weight (SPXEW) is currently testing support at its 200-day SMA (~7,700). I'm not sure that we've hit a capitulatory "flush" in stocks yet, but the setup for next weeks appears like it could deliver a bit of a binary performance–stocks continue to drop on Iran concerns or stocks initiate a strong technical bounce due to the near-term oversold status. Therefore, I'm providing a "Breakout" forecast for next week. I define "breakout" as a 2.0% or greater move in the S&P 500, either higher or lower, but next Friday.

• Monday (Mar. 23): Construction Spending
• Tuesday (Mar. 24): New Home Sales
• Wednesday (Mar. 25): Current Account Balance, Durable Orders, EIA Crude Oil Inventories, Export Prices, Import Prices, Mortgage Applications Index
• Thursday (Mar. 26): Continuing Claims, EIA Natural Gas Inventories, Initial Claims
• Friday (Mar. 27): Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, GDP – 3rd Estimate, PCE Prices, Personal Income, Personal Spending, University of Michigan Consumer Sentiment - Final

• Monday (Mar. 23): Abivax SA (ABVX), Agi Inc. (AGBK), AITI Global Inc. (ALTI), Caledonia Mining Corp. (CMCL), DBV Technologies SA (DBVT), Lithium Argentina AG (LAR), WeRide Inc. (WRD)
• Tuesday (Mar. 24): AAR Corp. (AIR), Centessa Pharmaceuticals (CNTA), Concentrix Corp. (CNXC), Core & Main Inc. (CNM), GameStop Corp. (GME), Hesai Group (HSAI), KB Home (KBH), New Gold Inc. (NGD), Smithfield Foods Inc. (SFD), T1 Energy Inc. (TE), Worthington Enterprises Inc. (WOR)
• Wednesday (Mar. 25): Alumis Inc. (ALMS), Celcuity Inc. (CELC), Chewy Inc. (CHWY), Cintas Corp. (CTAS), H.B. Fuller Company (FUL), Jefferies Financial Group Inc. (JEF), JinkoSolar Holding Co. (JKS), Karman Holdings Inc. (KRMN), Ondas Inc. (ONDS), Paychex Inc. (PAYX), PDD Holdings Inc. (PDD), Winnebago Industries Inc. (WGO)
• Thursday (Mar. 26): Argan Inc. (AGX), Bicara Therapeutics Inc. (BCAX), Commercial Metals Co. (CMC), Kodiak Sciences Inc. (KOD), Lumexa Imaging Holdings Inc. (LMRI), Pony AI (PONY), Seabridge Gold Inc. (SA), TMC the metals company Inc. (TMC)
• Friday (Mar. 27): Autolus Therapeutics PLC (AUTL), Carnival Corp. (CCL), Humacyte Inc. (HUMA), Legence Corp. (LGN), SBC Metals Group Holdings (SBC)

There was a moderate amount of economic data for markets to digest this week, highlighted by a FOMC meeting and the monthly wholesale inflation report (PPI). Regarding the FOMC meeting, although the committee acknowledged higher uncertainty tied to the conflict in the Middle East, the Fed's Summary of Economic Projections (SEP) revised their 2026-28 GDP forecasts higher. The Fed's inflation expectations were revised modestly higher for 2026 and slightly higher for 2027, likely due to higher energy costs. On the inflation front, the February PPI came in hot for the second month in a row, mostly driven by higher services costs. Here's a breakdown of the reports:

• FOMC Rate Decision/SEP: As expected, the FOMC left its benchmark interest rate unchanged at a range of 3.50-3.75%. The Fed's "dot plot" still suggests only one 25-basis-point cut in 2026. On the Summary of Economic Projections (SEP), real GDP was revised up to 2.40% from the December estimate of 2.3% in 2026, to 2.3% from 2.0% in 2027 and to 2.1% from 1.9% in 2028. However, PCE Inflation was also revised higher in 2026 (2.7% from 2.4%) and 2027 (2.2% from 2.1%). Powell said that there has not been as much progress on inflation as he had hoped. On another note, Powell said that he will not resign as chairman while his outstanding criminal investigation is pending, which could impact the potential start date of Trump nominated Kevin Warsh as the next Fed chair.
• Producer Price Index (PPI): Headline PPI increased a seasonally adjusted 0.7% month-over-month (MoM), which was above the 0.3% estimate and the largest increase in over two years. The jump puts the year-over-year (YoY) increase at 3.4%, above the 3.0% expected and is the highest level since February 2025. Core PPI increased 0.5% MoM which was above the 0.3% economists had expected. On a YoY basis, core PPI increased 3.9%, which was up from 3.6% in the prior month and above the 3.7% expected.
• New Home Sales: Sales of newly built homes dropped 17.6% in January from the prior month to a seasonally adjusted, annualized pace of 587,00 units. The figure was well below the 720K economists had expected and was the lowest level since 2022.
• Pending Home Sales: Increased by 1.8% from the prior month, which was well above the -0.7% expected but down 0.8% on a YoY basis.
• Empire State Manufacturing Index: Slipped into contraction territory in March (-0.20) from 7.10 in February.
• EIA Crude Oil Inventories: +6.16M barrels.
• EIA Natural Gas Inventories: +35 bcf.
• Initial Jobless Claims: Initial applications for U.S. jobless benefits declined 8K from last week to 205K, which was below the 210K economists had expected. Continuing Claims increased 10K from the prior week to a seasonally adjusted 1.857M.
• The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised down to 2.3% yesterday from 2.7% last Friday.

U.S. Treasury yields continued to push higher this week and the yield curve experienced some flattening. The yield lift appears to be tied to the ramp up in oil prices and the potential inflation implications, as well as a relatively hawkish FOMC meeting. Compared to last Friday, two-year Treasury yields rose by ~15 basis points (3.883% vs. 3.732%), 10-year yields increased ~11 basis points (4.394% vs. 4.285%), while 30-year yields (4.947% vs. 4.913%) saw a ~3 basis point lift.

Market expectations around the Federal Reserve's next monetary policy move shifted this week from a potential 25-basis-point cut to a potential hike in 2026. The probability shift appears to be driven by "higher for longer" expectations around oil prices, driven by heightened uncertainty around the U.S./Iran war. However, it's worth pointing out the Fed's "dot plot" is still signaling one 25-basis-point cut this year. Per Bloomberg, the probability of a 25-basis-point cut from the Fed in June was 25% last Friday but now shows a 24% chance of a 25-basis-point hike. The October FOMC meeting, which had a 70% chance of a cut last week has flipped to a 45% chance of a hike.

Last week I had a "moderately bearish" technical translation on the Nasdaq Composite Index ($COMP), highlighting the concerning "multiple support tests" at the index's 200-day Simple Moving Average (SMA). At the beginning of this week, the $COMP was above this long-term moving average, but closed below it on Wednesday following the post-FOMC market selloff. The $COMP is below its November low, and I don't see another potential support level until roughly 21,000 (the lows from last August). From a bullish perspective, the current Relative Strength Index (RSI) reading of 34 is a level where the $COMP bounced back in November and then again in February, but this week's support breach is technically bearish.

Near-term technical translation: bearish

The Nasdaq Composite, market-cap weighted S&P 500 index (SPX) and Dow Jones Industrial Average are all trading below their respective 200-day SMAs, so I thought I would focus on the S&P 500 Equal Weight Index (SPXEW) to highlight a technical perspective that it potentially more bullish. The SPXEW is currently hovering above its 200-day SMA and the RSI is on the verge of entering the technically oversold level of 30. When the SPXEW sold off last November the RSI reached 32 and subsequently bounced, but of course there is no guarantee that history will repeat, especially given the heightened geopolitical uncertainty. If you are bullishly inclined, you would likely want to see something like: a test of the 200-day SMA, accompanied with a bullish "hammer" candlestick pattern, or an open below the 200-day SMA, which is met with strong buying and a close near the highs of the day (i.e. a bullish engulfing candle). For now, since the SPXEW is holding above its 200-day SMA, I'll provide a slightly bullish technical snapshot.

Near-term technical translation: slightly bullish

The Bloomberg Galaxy Crypto Index is up 1% week-over-week, bitcoin is down 1% and ether is up 2% through the time of writing this on Friday. Earlier in the week, bitcoin briefly reached $76,000 following a short squeeze in futures markets. After Wednesday's release of the latest PPI report, the crypto market came under pressure, with additional downside pressure stemming from the FOMC meeting.

During the week, the Commodity Futures Trading Commission (CFTC) joined the Securities and Exchange Commission (SEC) in issuing an interpretation of how federal securities laws apply to certain crypto assets. Specifically, the SEC defined what constitutes a security as it applies to cryptocurrencies and provided a token taxonomy for digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. The SEC also addressed how "non‑security crypto assets" may become subject to an investment contract and provided clarification on federal securities laws related to airdrops, protocol mining, protocol staking, and the wrapping of non‑security crypto assets. Given the lack of progress on the CLARITY Act, this development is positive news.

Looking at the two most recent "crypto winters," which bottomed in December 2018 and November 2022, bitcoin outperformed other cryptocurrencies for approximately the first six months of the recovery. Historically, these bear markets have bottomed near bitcoin's 200-week moving average and its cost of production. If February's low of $60,000 does prove to be the bottom for bitcoin and the broader crypto market, the recovery so far is tracking previous cycles. There were periods during the two prior recoveries when altcoins outperformed, but those periods proved to be short‑lived. History suggests that altcoins are unlikely to sustain outperformance while crypto investors seek to reestablish confidence following deep bear markets. Ultimately, the crypto market is momentum‑driven, and sustained momentum in bitcoin is required for altcoins to outperform.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks are on track to be lower on the week and market breadth contracted as a result. Market breadth on the Nasdaq is currently at the lowest levels since 2023. Compared to last Friday's, the SPX (white line) breadth fell to 48.30% from 50.80%, the CCMP (blue line) declined to 35.49% vs. 37.43%, while the RUT (red line) is down to 47.04% from 49.60% (all week-over-week).

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (40 today): BP PLC (BP - $0.70 to $45.16), Ciena Corp. (CIEN - $9.18 to $403.40), Dow Inc. (DOW - $0.14 to $37.35), Marathon Petroleum Corp.  (MPC - $1.35 to $234.43), Micron Technology Inc. (MU - $8.76 to $435.51), Quanta Services Inc. (PWR - $8.78 to $569.17)

This Week's Notable 52-week Lows (102 today): Asbury Automotive Group Inc. (ABG - $1.79 to $187.18), Brown Forman Inc. (BF/A - $0.07 to $23.52), Conagra Brands Inc. (CAG - $0.12 to $15.28), Diageo PLC (DEO - $0.01 to $74.59), Floor & Décor Holdings Inc. (FND - $1.81 to $51.45), The Campbell's Company (CPB - $0.15 to $20.88)