Cracks Forming As Markets Press Key Support
Cracks forming
Markets are starting to feel heavy again. Equities are pressing key support just as macro pressure builds and key flow supports begin to fade. The range is still intact, but it’s starting to look increasingly fragile.
Will we break?
SPX closed below the 200-day and is pressing the lower end of the range. Our déjà vu setup is playing out and breakdown risk is building.
Source: LSEG Workspace
Buyback blackout
With buybacks stepping away, downside moves become more exposed.
"We are expecting the next blackout window to begin this week ~3/18, estimating ~45% of the S&P 500 to be in blackout by that point, assuming entry 6 weeks prior to earnings ... We expect blackout to run through the end of April."
Source: Cullen Morgen
Oil shock duration
"The option markets implied probability of the Brent May contract expiring above $100 increased from 15% to 21% over the last five days. While the Polymarket's base case remains that the conflict ends between April 1 and May 15 (47%), the implied probability of the conflict lasting beyond May 15th increased to 45%". (GS)
Source: GS
Dollar and the oil crisis
Last time it caught strong bids and squeezed for some 6 months. A similar move would tighten financial conditions quickly.
Source: TS Lombard
Soggy Euro
The euro has sold off aggressively in the wake of the Iran war. We briefly bounced at the range lows, but the move has been weak and lacks follow-through.
Now sitting well below the 200-day moving average, with the 21-day crossing lower, a bearish shift in trend dynamics.
Last time this setup played out, the euro didn’t stabilize, it continued the move lower.
Source: LSEG Workspace
ECB's headache
Bund yields are set to reprice faster than Treasuries as inflation lingers.
If Hormuz stays shut for more than a month, oil could spike toward $150, forcing the ECB into emergency tightening and accelerating the Eurozone equity drawdown. Latest note on imploding Europe here.
Source: LSEG Workspace
Gold cracks
We’ve been flagging fading momentum in gold for weeks (most recently two days ago). Now the metal is printing one of its largest down candles since the early-February puke and breaking below the 50-day moving average, a level it hasn’t closed beneath since last summer. Key support comes in at $4800, with the 200-day moving average near $4600. Latest note on gold from earlier today here.
Source: LSEG Workspace
Volatility dynamics in reverse
The sharp upside move triggered significant options demand, driving implied volatility to elevated levels. As spot stabilized, the carry became too attractive to ignore, bringing in vol sellers. This supply of volatility is now feeding back into downside pressure on spot. More on silver here.
Source: LSEG Workspace
NVDA cheap
Bernstein loves the valuation - says it is almost absurdly cheap.
"NVIDIA’s roadmap looks really solid, their capability gap continues to widen, new offerings ought to help cement their position in inference just as they dominate training, and the order book suggests further upside to numbers, with the stock (in our opinion) almost absurdly valued given their positioning (trading ~15x our CY27/FY28 EPS). We would be buyers... We rate NVDA OP with a $300 PT." Full note on NVDA here.
Source: Bernstein
Have fun staying boring
1Y performance:
SK Hynix +430%
Samsung +297%
NVDA +50% (flat since last summer)
The AI trade didn’t rotate. It relocated. More on Korea here.
Source: LSEG Workspace
Bottom line
The pieces are lining up. With buybacks fading and macro pressure building, downside moves are becoming more exposed. The range still holds, but the risk is that the next move lower breaks it.
