Hey Traders,

Friday's relief rally was a welcome sight for the bulls, but nothing actually got solved.

Oil is still sky high, and I don't see a near-term fix for bringing it down.

Brent sits above $104 and WTI is hanging right around $100.

If you want to know what's happening in the economy, though, don't watch crude. Watch diesel.

Diesel is the backbone of the transportation industry: trains, semis, construction equipment, farm equipment, and plenty of light-duty trucks all run on it.

And on Friday the national average crossed $6 a gallon for the first time ever. A year ago it was $3.71. That's a 63% jump, per AAA.

Essentially, everything you buy has a touch point with diesel. When it goes up, prices go up, and that puts pressure on bonds.

And the bond market looks terrible.

The 10-year (the yields of just about all medium and long-term borrowing keys off of) touched 4.98% on Friday, and the 30-year sits at its highest level since 2007. Freddie Mac's weekly mortgage average is already 6.76%, and daily lender quotes crossed 7% on Thursday.

That kills refis, new home buying, and existing home sales. Don't even ask me about HELOCs. It's going to take real need for people to touch those.

Anyone who bought a house between 2019 and early 2022 is essentially trapped in their amazing mortgage.

Mine is 2.75%. Even if I wanted to move, I couldn't justify it. My payment would jump for the same house because borrowing costs four points more than when I locked in.

Then there's the Fed. Wednesday's meeting was supposed to be a snoozer. After Friday's inflation print, the market has a rate hike priced at roughly 90% odds.

All this is to say I believe we're at the breaking point for the market. If the 10-year goes over 5%, I'm not sure how stocks do anything but continue the brutal slide lower.

So yes, Friday was great.

But the relief rally solved absolutely nothing.

Thankfully, that doesn’t eliminate opportunities.

I’ve got one stock I think is going higher this next week and another I think is going to sink with the market.

So let’s get into it…

One to Love: Robinhood Gets Paid Either Way

Robinhood (HOOD) exploded higher ahead of this week's selling and then pulled back with the market. It ran from the low 90s in mid-August to almost $124 on September 3, and it's now sitting around $112. That's still well above the $100 level it broke out over in late August, which looks like a new floor to me.

Here's why I like it in a tape like this one. Robinhood makes money when people trade, and people trade more when the market's moving. Look at August: 28.6 million funded customers, $384 billion on the platform (up 26% from a year ago), $4 billion in net deposits, and stock trading volume up 68% from last August.

Analysts piled on over the past two weeks. Morgan Stanley, Mizuho, Piper Sandler, Scotiabank, and StoneX all upgraded, initiated, or raised targets, with the range running from $136 to $170.

I'm pretty certain the market as a whole is heading for a down week.

But Monday and Tuesday ahead of the Fed, I think we could see some FOMO buying (fear of missing out, traders chasing Friday's bounce). If that happens, HOOD is likely a big winner. I like the stock higher.

One to Leave: A $2,000 Phone in a $6 Diesel World

Congrats on the folding phone, Apple.

I'm not impressed.

The iPhone Duo starts at $1,999, runs to about $3,000 for the 2-terabyte version, and doesn't ship until October 23. Samsung has sold folding phones for years, so this isn't a new concept. And I wonder exactly how the end user who wants one is going to afford it while filling up at $4.29 a gallon.

It'll sell like hotcakes in SF, NY, LA, Austin, Philadelphia, and Chicago. I'm not so sure what demand looks like in Milwaukee, Cleveland, and Omaha.

My guess: not high.

Even the bulls agree it's a niche product. TD Cowen figures Apple ships about 6 million Duos in the back half of the year. At $2,000 each, that's $12 billion for a company that books more than $400 billion a year.

Meanwhile the stock is priced like earnings are going to double. Apple (AAPL) trades around 33 times forward earnings against 20 to 24 for Alphabet, Microsoft, and Amazon. And Bank of America just cut its 2027 earnings estimate because the cheaper-than-expected pricing squeezes margins.

The stock jumped 3.6% to $326.57 the day after the event and is up 20% this year.

The run-up has been nice, but I'm looking for a little mean reversion here (a stretched stock drifting back toward its average).

The big question: Will the team pick one of these two on Monday to become the Ticker Highlight Option Trade of the Week?

I’m always surprised how things end up. Tap this link before 10:30 AM on Monday to join and make sure you get the next play.

Your only option,

Mark Sebastian