Market Outlook
Towards the tail end of the week, the market found itself a new fear to latch onto. The tariff fears are almost yawn-inducing at this point. But this new fight between Israel and Iran could be a headline that the market may try to latch onto this summer. As we know, the market climbs on a wall of worry. This new worry, for now, has energy stocks breaking out and VIX climbing as a result.
The markets were within 1–2% of retesting all-time highs, with Nasdaq inching out ahead of S&P by a tiny margin. The fastest V-shaped recovery was not able to cross the finish line and instead broke the extremely steep uptrend.
Now, even with this tiny break of the V-bottom trendline and an increasing VIX, the market is still trading like a snail compared to the once-in-a-lifetime action we were seeing back in April. Which is a good thing.
It always tends to feel weird to discuss lives being lost in a battle between two countries and how it relates to our PnL. With that being said, I don’t see this conflict doing much to really shake up our markets. Sure, oil will increase, but it’s not going to affect Apple or insert-your-top-name's earnings next quarter.
It does seem like the markets and most sectors do need to reset. That could be a few days down or, as this market has been trading lately, even a day lower might be all that’s needed.
Virtually all sectors are either forming bull flags and pulling back into support or forming textbook bases. The only few not playing ball are healthcare, which is still somehow in a stage 4 breakdown, and materials, which have just started to inch out of their own breakdown stage.
Trading-wise, from a swing trading lens on my end, has been somewhat light the past few weeks, and my current watchlist is a bit smaller than normal. There are not a handful of tight bull flag setups that are really catching my eye. But Jorge did call out one of the best charts I've seen in this—BK.
Macro Rotation Outlook
VLO
YUM
