Category: Uncategorized

MarketSurge powers the charts in this video.

Last week, we saw an oversold bounce on expectations that the Middle East war would soon come to an end. QQQ and SPY rallied to their declining 20-day moving averages, where they found initial resistance. 

It is remarkable how resilient stocks remain despite the price of crude oil nearly doubling in just six weeks. Historically, almost every U.S. recession since WWII has been preceded by a sharp rise in oil prices. Given that the average recessionary drawdown is approximately 24%, the market appears somewhat optimistic – the S&P 500 is trading about 6% below its all-time high. The market even bought the bad news on Thursday – stocks gapped down on Trump’s war comments and quickly recovered.

Despite all the scary headlines and excessive volatility, there might even be a follow-through day in the indexes next week. The IBD definition of a FTD is a 1% gain in an index above the previous day’s volume if it comes 4 to 7 days after the latest market low. The good news is that there are stocks to buy if there’s one. I am not that confident that such buys will amount to much. 

Some stocks and ETFs already broke out last week…

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MarketSurge powers the charts in this video.

The selling has accelerated. SPY is now below its volume-weighted average price since its April 2025 lows during the tariff war correction. We are in the midst of a different war now with even more serious consequences for the entire world – a potential energy crisis and stagflation. The next potential support for SPY is around 610.

It is rare to see the market panic and sell everything. Those periods typically don’t last long and are a precursor to bottoming. The major stock indexes around the world are already down 10-20% from their recent highs. Last week, we finally saw some elements of panic selling as even the last remaining momentum leaders started to crack. This is actually positive for the future prospects of the market. The sooner a potential crisis is priced in, the sooner the market will be able to see through the chaos and quickly determine the potential winners. Look at the price action in ZM, for example, during the Covid selloff in 2020. Back then, SPY went down 35% in less than two months. During that time, ZM made a new all-time high and gained 5x in the following seven months. There will always be winners and losers, and the market does a good job highlighting them.

Take, for example, the current crisis. The energy sector is having one of the best years in its history so far. So many, otherwise slowly moving and boring, oil and gas stocks have been making new all-time highs on a weekly basis. Many of the chemical-related stocks are also pushing to new highs as they benefit from shortages  – MEOH, CF, DOW, CC, etc. The solar stock SEDG is also gaining notable relative strength – the longer this energy crisis lasts, the more people and countries invest in solar and nuclear. Obviously, when the market smells a potential end to this war, many of these stocks are going to take a serious haircut.

It is good to keep in mind that regulators have the same playbook for every serious crisis – they throw a lot of liquidity into the system. When that happens again, gold, crypto, and many stocks are likely to have their time of day again. Until then, it is important to protect capital, confidence, and stay in good trading shape. 

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MarketSurge powers the charts in this video.

The downtrend continues. Every slight bounce is getting faded. SPY and IWM have now been rejected near their declining 10-day moving average multiple times in the past couple of weeks. QQQ was rejected near its declining 20dma and closed below its 200dma. This is the definition of a steep downtrend.

In the meantime, energy prices are holding a bid. XLE keeps making new highs. The market doesn’t believe the promises for a short war anymore.  Words are not enough when a reputation has been tarnished. Now, it wants action. 

The Fed kept interest rates the same. Why should they cut them? Inflation numbers are coming way above estimates. Crude oil, gas, and fertilizer prices staying near their highs will only elevate inflation expectations. No wonder why Treasuries are getting hit, too. The Fed might be able to control the yield on the short end of the curve, but it can’t on the long end – the market decides how much it will pay. The last time both equities and Treasuries declined together was in 2022.

The silver lining of the current correction is that it can easily highlight future winners. Last week, we saw fiber optic and memory chip stocks shine amid the selloff. If something doesn’t fall when the general market is dropping, it is probably getting accumulated. This doesn’t mean buy them now. If the indexes accelerate lower, everything will be hit during panic selling. If you buy too early, you will be stopped. All of those stocks could easily test their rising 50 and 200dma in a steep market correction, and they are a long way from there. Just look at PLTR and HOOD in March-April of 2025, when they dropped about 50% and are still staying above their rising 200dma. I still think that we haven’t really seen any real panic selling, which is required by definition for a sustainable bottoming process.

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My subscription service includes a Discord room and private X feed with options and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. See how my ideas/alerts performed.

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Disclaimer: Everything I share is for educational and informational purposes only, and it should not be considered financial advice. Read my full disclaimer here.