What's up, Traders Edge?
Monday delivered a masterclass in why you never trade the opening bell after weekend news. The S&P 500 (SPX) opened at session lows below 6,800, rocketed to the 50-day moving average at 6,902, then closed essentially flat, up just 2.74 points after a wild 105-point range.
The culprit? Iran war headlines that sent markets into chaos before cooler heads prevailed.
But here's the lesson that'll save your account: when major news breaks over the weekend, give it ten minutes before you do anything.
Better yet, wait an hour.
(To watch Monday's video replay, tap this link.)
Why Opening Minutes Lie to You
SPX opened at the lows. Invesco QQQ Trust (QQQ) opened at the lows. United States Oil Fund (USO) opened at the highs. Then everything reversed.
Oil got a secondary pop when Iranian guards threatened to close the Strait of Hormuz, but even that faded. Crude opened limit up overnight, gave it all away, dropped to $70, then closed back above $72.
The first five minutes are pure confusion. If you've got winners, you sell. If you have losers, you wait ten minutes. If you're thinking about doing something, wait.
Energy Maxed Out Unless Things Get Worse
I think energy is probably maxed out unless tensions escalate further. USO dropped to $83, recovered to $87. Light sweet crude bounced off $70 to close near $72.
Natural gas might have more room to run. Countries in the Middle East are closing LNG ports, and we could see another cold spell hit Europe and the US in March. Keep an eye on Cheniere Energy (LNG).
VIX in Pure Confusion Mode
The CBOE Volatility Index (VIX) sits at 21.58, still elevated despite Monday's recovery. We've got weekend adjustment keeping it high, VIX above futures, but the front end of the futures curve is flat in contango before steepening in the back.
This setup either turns into a buying opportunity or marks the inflection point where markets roll over. We've seen this pattern three times in the last month. One of these times it's actually gonna break through, either we break down or we pop.
Bonds Get Crushed Despite War Premium
Monday's surprise was the bond market collapse. iShares 20+ Year Treasury Bond ETF (TLT) gave back its entire rally from February 25-28, dropping back below $90. iShares 7-10 Year Treasury Bond ETF (IEF) fell below $98, threatening $97.
If oil stays high, that's gonna be a real problem for bonds. And that creates a bigger problem for private credit.
Your Stock to Watch: KKR
This brings me to my one stock to watch for the week: KKR & Co. (KKR). They're huge players in the private credit market, and they're down $55 since mid-December.
KKR is your canary in the coal mine. At its bottom, it traded below April lows. There are real problems in the private credit space that could create serious issues.
If bonds continue falling, oil stays high, and expectations for fewer rate cuts persist, we're gonna see real blood in the streets in private credit. I don't think KKR is going anywhere as a company, but the technical damage tells the story.
This Week's Big Events
We've got non-farm payrolls, inflation data, GDP numbers, and Broadcom (AVGO) earnings Wednesday. The market is pricing about $27-28 worth of movement in Broadcom through Friday, nearly 10% implied volatility.
That makes sense given Broadcom's earnings history of big drops and rallies. This is the seventh biggest company in the United States, bigger than Tesla (TSLA). These earnings might be bigger than non-farms.
Looking at SPX for Friday, the market is pricing about $110 of movement. That seems pretty fair, maybe slightly light, but nothing I want to chase.
Bitcoin's Short Squeeze
We saw a nice little squeeze in Bitcoin (BTC) Monday. I'm not sure anything fundamental was solved, but if it makes a second leg up, we could see iShares Bitcoin Trust (IBIT) run at $46 and Bitcoin maybe going back to $80,000.
Your Trading Game Plan
The VIX confusion pattern we're seeing either resolves with a breakout or breakdown. Three times in the last month we've seen this setup. The fourth time might be the charm.
Watch KKR for private credit stress signals. Monitor energy for escalation signs. And remember Monday's lesson about opening minutes, they lie more often than they tell the truth.
Let's hope this war ends with a mostly peaceful outcome. The market's already telling us it expects cooler heads to prevail.
Your only option,
Mark Sebastian