What's up, Traders Edge?
Monday felt like one of those days where the market wanted to celebrate, but something was holding it back. We got a decent rally across the board, but the devil was in the details.
(To watch Monday's video replay, tap this link.)
The Rally That Wasn't
S&P 500 (SPX) closed up over 1%, same with the Nasdaq (QQQ) and Dow Jones (DIA). Sounds great, right? Here's the problem: they were all well off their highs. SPX hit 6650 at the peak but closed at 6581. That's 70 bucks off the high, folks.
We're still sitting below the 200-day moving average and couldn't even close above Friday's high. That tells me this isn't the surefire deal many think it is. There's confusion out there.
iShares Russell 2000 (IWM) painted a slightly different picture. Small caps are in better technical shape than the other indexes, still well above that 200-day line. IWM actually managed to close above Friday's highs, giving us a little relief.
Here's something to file away: when this war situation gets resolved, IWM is going to be your leader. Keep that on your radar.
The Invesco QQQ (QQQ) looked the ugliest of the bunch. Money is still trying to escape tech when it can find an exit.
Take NVIDIA (NVDA). I'm shocked people were buying it Monday. I'm not surprised it failed at that 200-day moving average again. This marks the second day in a row below 200. We haven't seen that since the tariff tantrum last year. It's been almost a year since these names truly rolled over.
I think there's exposure to the SMCI story within NVIDIA that we don't fully understand yet. There's a real chance NVIDIA takes out these recent lows.
The Oil Story Continues
United States Oil Fund (USO) had a nice sell-off, dropping about 11 bucks. It closed the gap from that recent wick and now sits in no man's land. It needs to pick a direction.
My feeling is there's probably one more surge coming. I don't know if we get back to the recent high, but a move back above 117 is probably in the cards.
What's interesting is option premiums are starting to wear off in oil. That could signal this oil trade is getting tired. Friday felt like a relief rally where any decent news was going to be an excuse to push higher.
Why I Don't Trust This Rally
The answer is bonds. They did not participate Monday.
iShares 20+ Year Treasury Bond (TLT) was up about 50 cents but couldn't break out of Friday's range. Bonds are in terrible shape, sitting just off a three-month low.
If bonds stay low, the stock market is going to continue to have problems. That's the key relationship to watch.
SMCI Fallout Winners
This SMCI news is bad, but there are clear winners emerging.
Hewlett Packard Enterprise (HPE) could absolutely be a winner here. It had a strong Monday and could see continuation.
Dell Technologies (DELL) is probably a nice winner out of this situation.
Intel (INTC) is another potential winner. I'm surprised the SMCI stuff hasn't worked in Intel's favor yet, but they do a lot of server business that could benefit.
The less obvious winners include Advanced Micro Devices (AMD). If NVIDIA gets itself in real trouble, AMD starts to look really interesting.
Gold in Free Fall
Gold is dropping hard right now. There will be an opportunity to buy, but we're not there yet.
I'm watching option premiums climb higher and higher. When you see these premiums get into the mid-40s, that's probably your sign we can go long. We're still in the 30s, but they're ramping up fast.
Your Stock to Watch
Keep an eye on the mid-cap banks. Fifth Third Bancorp (FITB) and Huntington Bancshares (HBAN) have gone straight down, similar to bonds, but they're starting to get a little bid.
Both look really interesting. If rates do start to rise, these names are going to be in great shape.
This Week's Calendar
Not a lot of major news coming. We get PMIs on Wednesday and a bunch of Fed governors speaking. Friday is the one to watch with consumer confidence data. That could be interesting.
Earnings don't really heat up until after Easter, so this week stays relatively quiet on that front.
One question I get all the time: "Mark, you've been telling us to start looking for stocks we want to own and start shopping." That's true. There's opportunity out there. Stocks are on sale.
How do you find those stocks on sale? We've developed something here at Option Pit run by Andrew called the Ceres Club. It helps you make long-term option trades. If you're interested, click this link.
Keep an eye on those mid-cap banks and keep watching bonds. That'll set the story for the week.
I'm Mark Sebastian. I am your only option.
Have a good one.