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 heightened uncertainty around Iran and the trajectory of oil prices. Perhaps unsurprisingly, it was a volatile week, driven by a heavy flow of headlines related to the Iran conflict. On Monday, WTI crude oil futures hit an intra-session high of roughly $119 and the CBOE Volatility Index (VIX) hit a high of 35.3, but both subsequently pulled back, driven in part by a statement from U.S. President Donald Trump that the war was essentially done. WTI crude oil futures subsequently dropped all the way down to ~$77.00 and the VIX fell to the 22-25 area. However, on Tuesday U.S. Defense Secretary Pete Hegseth said that it would be the most intense day of U.S. and Israeli airstrikes on Iran since the start of the conflict, so investor optimism around the duration of the conflict has been waning. It's unclear how long the conflict will persist, or how high oil prices will go, and this explains the choppy, volatile price action in equity markets. Another consequence of rising oil prices, and also weighing on markets, is higher Treasury yields, driven in part higher by near-term inflation expectations. After hitting a low of 3.96% back on February 27th, yields on the 10-year U.S. Treasury yield currently stand at 4.285%. The U.S. Dollar has also been climbing higher with yields, and hitting the highest levels since November today (DXY + 0.58 to 100.32).

On the earnings front, Oracle delivered a "beat and raise" quarter on Tuesday, while communicating that no additional debt will be raised this year, which helped heal some of the concerns around heavy artificial intelligence (AI) spending. From a broader perspective, Q4 earnings season is essentially over, and the results were strong. Out of the 497 S&P 500 companies that have reported results, 65% have beat on the top line while 74% have beat on the bottom line. Revenue growth has been tracking at +9.23% year-over-year while earnings-per-share (EPS) growth is +13.63%.

At the time of this writing (2:15 p.m. ET) stocks are lower across the board and near the lows of the session (DJI - 32, SPX - 30, $COMP - 200, RUT - 14). The primary near-term driver of stocks is obviously oil prices and any developments on the Iran war. Also under consideration by markets is the duration of the "blockage" of the Strait of Hormuz. Even if oil prices don't spike higher from here (WTI crude last traded at ~$98), the longer oil prices remain elevated the greater the potential economic consequence, theoretically at least. And while the spike in oil prices ($119) and the VIX (35) on Monday, along with their subsequent pullback could represent a near-term capitulation "peak" for markets, I'm not convinced because historically there has been a corresponding "V" response in stocks. I'm not sure stocks ever fully "capitulated" and today the major indices are falling to fresh multi-month lows.

Aside from the Iran conflict/war, there will be a lot of potential market-moving catalysts next week. First, Nvidia's annual Global Technology Conference (GTC) kicks off Monday and runs through Thursday. Nvidia CEO Jensen Huang will likely deliver several AI-related headlines, which could have an impact on tech stocks. There will also be several monetary policy meetings from global central banks–the U.S. Federal Reserve (Tue-Wed), the Bank of Japan (Wed-Thur), and the European Central Bank (ECB) (Thur). In my view it seems likely that the Federal Reserve will communicate that they are in a "wait and see" mode in regard to the economy, but markets have a tendency to be sensitive to the language selected in the statements (the policy statement will be accompanied with a Summary of Economic Projections). On Wednesday after the bell, we'll also get an earnings report from memory and storage specialist Micron Technology, which has been one of the best-performing stocks over the past year. Lastly, there is the technical set-up heading into next week. The Nasdaq Composite ($COMP) is currently below its 200-day SMA and the S&P 500 (SPX) is less than 1% above its 200-day SMA. If oil push higher and stocks continue to drop, there could additional selling pressure if these indices lose key support at their respective 200-day SMAs. Given that nobody knows how the Iran conflict will unfold or for how long, I'm once again providing a "Volatile" forecast for next week.

• Monday (Mar. 16): Capacity Utilization, Empire State Manufacturing, Industrial Production
• Tuesday (Mar. 17): Building Permits, Housing Starts, NAHB Housing Market Index, Pending Home Sales
• Wednesday (Mar. 18): Federal Open Market Committee (FOMC) Rate Decision, Producer Price Index (PPI), EIA Crude Oil Inventories, Mortgage Applications Index, Net Long-Term TIC, BOJ starts two-day Monetary Policy Meeting
• Thursday (Mar. 19): ECB Governing Council monetary policy meeting, Continuing Claims, EIA Natural Gas Inventories, Initial Claims, New Home Sales, Philadelphia Fed Index, Wholesale Inventories
• Friday (Mar. 20): no reports
   

• Monday (Mar. 16): Annexon Inc. (ANNX), Dollar Tree Inc. (DLTR), Forgent Power Solutions Inc. (FPS), Ke Holdings Inc. (BEKE), MBX Biosciences Inc. MBX), Oruka Therapeutics Inc. (ORKA), Science Applications International Corp. (SAIC), Semtech Corp. (SMTC), VinFast Auto Ltd. (VFS)
• Tuesday (Mar. 17): Academy Sports and Outdoors Inc. (ASO), Alour Lifestyle Holdings Ltd. (ATAT), Corporacion America Airports SA (CAAP), DocuSign Inc. (DOCU), Elbit Systems Ltd. (ESLT), GDS Holdings Ltd. (GDS), Lululemon Athletica Inc. (LULU), New Gold Inc. (NGD), Oklo Inc. (OKLO), Tencent Music Entertainment Group (TME)
• Wednesday (Mar. 18): Dlocal Ltd. (DLO), Equipmentshare.com Inc. (EQPT), Five Below Inc. (FIVE), General Mills Inc. (GIS), H World Group Ltd. (HTHT), Jabil Inc. (JBL), Macy's Inc. (M), Micron Technology Inc. (MU), Williams-Sonoma Inc. (WSM)
• Thursday (Mar. 19): Accenture PLC (ACN), Alibaba Group Holding Ltd. (BABA), Carnival Corp. (CCL), Darden Restaurants Inc. (DRI), Erasca Inc. (ERAS), FedEx Corp. (FDX), PDD Holdings Inc. (PDD), Planet Labs (PL), Signet Jewelers Ltd. (SIG)
• Friday (Mar. 20): SANUWAVE Health Inc. (SNWV), Xpeng Inc. (XPEV)

There was a solid dose of economic data for markets to digest this week, which included some stagflation-like signals. First, the second estimate of Q4 U.S. gross domestic product (GDP) was revised down to just 0.7% from the initial 1.4% and Durable Orders for January were flat and well below estimates. New orders for manufacturing durable goods have declined three out of the last four months. Next, core Personal Consumption Expenditures (PCE) Prices came in 0.1% above estimates on a month-over-month basis and ticked higher on the annual gain (3.1% in January, from 3.0% in December and 2.8% in November). On a positive note, job openings (JOLTs) moved back up last month, weekly initial claims remain subdued, and the February Consumer Price Index (CPI) was in line with expectations. Here's a breakdown of the reports:

• PCE Prices: Headline month-over-month (MoM) prices increased 0.3% in January, down from +0.4% in December and in line with the +0.3% economists had expected. This translates into a year-over-year (YoY) gain of 2.8%, which was a downtick from 2.9% in December and 0.1% below expectations.
• PCE Prices – Core: Headline core prices increased 0.4% MoM (above the +0.3% expected) and +3.1% on a YoY basis (an acceleration from +3.0% in December and +2.8% in November).
• CPI: Headline CPI increased 0.3% MoM, which puts the YoY rate at 2.4% (both in line with estimates). Core CPI increased 0.2% MoM and 2.5% YoY (both in line with estimates).
• JOLTs – Job Openings: January job openings were 6.946M, up from the prior month's reading of 6.55M and above the 6.70M economists had expected.
• Q4 GDP – second estimate: U.S. GDP rose at a seasonally and inflation-adjusted rate of just 0.7%, down from the first estimate of 1.4% and below the Dow Jones consensus estimate of 1.5%. The impact from last fall's government shutdown is estimated to be ~1.00-1.20%.
• Personal Income: +0.4% vs. +0.3% est.
• Personal Spending: +0.4% vs. +0.3% est.
• University of Michigan Consumer Sentiment: Consumer sentiment declined to 55.5 in the survey's preliminary March reading from 56.6 in February. Analysts polled by The Wall Street Journal were expecting 55.3. The survey's Current Conditions index moved up to 57.8 from 56.6, while the Expectations gauge declined to 54.1 from 56.6.
• Durable Orders: 0.00% vs. 1.0% est.
• Durable Orders – ex transportation: 0.4% vs. 0.7% est.
• Housing Starts: 1.487M vs. 1.375M est.
• Building Permits: 1.376M vs. 1.40M est.
• EIA Crude Oil Inventories: +3.82M barrels.
• EIA Natural Gas Inventories: -38 bcf.
• Initial Jobless Claims: Initial applications for U.S. jobless benefits declined 1K from last week to 213K, which was below the 215K economists had expected. Continuing Claims decreased 21K from the prior week to a seasonally adjusted 1.850M.
• The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised up to 2.7% today from 2.1% last Friday.

Once again, U.S. Treasury yields jumped across the board this week, and the yield curve saw some modest flattening. This week's treasury selling is essentially tied to the ramp-up in oil prices and the potential inflation implications. Compared to last Friday, two-year Treasury yields rose by ~18 basis points (3.732% vs. 3.556%), 10-year yields also increased ~15 basis points (4.285% vs. 4.133%), while 30-year yields (4.913% vs. 4.756%) saw a ~16 basis point lift.

Market expectations for rate cuts from the Fed in 2026 took a downshift this week, likely driven by higher oil prices, inflation expectations by extension and Iran uncertainty. Per Bloomberg, the probability of a 25-basis-point cut from the Fed in June has dropped from 56% to 23%, and September, which had a theoretical 100% probability of a cut last week, has essentially been "cut" in half at the current 54%.

Market expectations for rate cuts from the Fed in 2026 didn't shift much this week, remaining at relatively subdued levels. Per Bloomberg, the probability of a 25-basis-point cut from the Fed in March is unchanged at 5%, April ticked up to 23% from 20%, while June currently stands at 60% from 57% (all week-over-week).

The Nasdaq Composite Index ($COMP) is on track to be down roughly 1.10% on the week and appears to be in an intermediate-term downtrend. After dropping through the 100-day Simple Moving Average (SMA) back in early February, the $COMP has bounced off the 200-day SMA twice over the past two weeks and today it is threatening to close below this moving average for the first time since last May. Technically, a close below this level would be bearish (I don't have the luxury of seeing where it closes today since its midday as I'm writing this), and the next potential support could either come into play at 22,078 (closing low from last November) or 21,898 (intraday low from last November). If the $COMP can close above the 200-day SMA this would be incrementally bullish, but as I've stated previously, it's not bullish to test support multiple times in a short period of time.

Near-term technical translation: moderately bearish

The market-cap weighted S&P 500 index (SPX) registered another technical "step down" this week, on track to be shed another ~1.30% in what would be its third straight week of losses. The bullish perspective would note that the index is still above its closing low from last November (6,528) and its 200-day SMA (6,604). However, a near-term downtrend is still intact and the technical view remains "moderately bearish" like last week.

Near-term technical translation: moderately bearish

This week was another relatively quiet week in the crypto market. Bitcoin is up 7% week-over-week through the time of writing this on Friday, while Ether is up 10%. Bitcoin has once again met resistance at its 50-day exponential moving average. There has been a broad improvement in on-chain activity over the past three weeks, which could be suggesting an intermediate-term bottom is in. Spot ETPs have seen three weeks of inflows, while spot trading volumes and transaction fees have also risen. While large digital natives have been adding to their positions since November, digital natives of all sizes have shifted back to accumulation. Bitcoin balances held on exchanges are starting to fall. This metric often rises as bitcoin sells off and falls when investors move holdings off exchanges. At the same time, demand for puts is falling.

Perpetual futures open interest is starting to rise off very low levels. Their funding rates are negative, which indicates there is more demand for shorts versus longs. This contrasts with other on-chain metrics that suggest investors are beginning to position for upside exposure. This setup is the inverse of how investors were positioned heading into October (albeit at much lower levels of futures open interest). At that time, perpetual futures were seeing more demand for longs while other on-chain metrics pointed to deteriorating sentiment. This mismatch in positioning has historically set the stage for liquidations in the futures markets. In this case, levered short positions may potentially be at risk of being liquidated. Historically these types of rallies have been short lived.

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. This week's deterioration in was substantial and market breadth on the Nasdaq is dropping to the lowest levels since 2024 today. Compared to last Friday's, the SPX (white line) breadth sank to 50.80% from 59.76% and the CCMP (blue line) is essentially flat at 37.43% vs. 41.68%, while the RUT (red line) moved down to 49.60% from 60.64%.

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 (55 today): Applied Optoelectronics Inc. (AAOI - $2.26 to $103.93), BP PLC (BP + $0.33 to $42.49), EQT Corp. (EQT + $0.17 to $64.81), Nutrien Ltd.  (NTR - $1.08 to $82.86), Unifirst Corp. (UNF + $1.08 to $273.96), Vertiv Holdings Co. (VRT - $1.61 to $263.77)

This Week's Notable 52-week Lows (115 today): Ares Management LP (ARES + $4.20 to $100.70), Boston Scientific Corp. (BSX + $0.07 to $68.62), Diageo PLC (DEO + $1.04 to $77.79), Erie Indemnity Company (ERIE + $2.78 to $245.81), Fair Isaac and Company (FICO + $48.95 to $1,147.15), General Mills Co. (GIS + $0.77 to $40.17)