Why I'm Ready for Aggressive Buying After a Wild Swing

Market traders

Following a sharp "sell-the-news" reaction to President Trump's speech to the nation, the market swung wildly and finished the day with just minor losses on Thursday.

The S&P 500 was close to flat and the Roundhill Magnificent Seven ETF (MAGS) lagged again with a loss of 0.7%. The iShares Russell 2000 ETF (IWM) small-cap index continued its pattern of outperformance with a gain of 0.7%. When small caps lead, we usually see positive breadth, and that was the case on Thursday with around 53% of stocks finishing in the green.

Oil Moves the Market

Stocks were trading poorly in the premarket after Trump's comments that the military would pound Iran's infrastructure if it continued to block the Strait of Hormuz. Oil prices moved sharply higher, but about an hour into the trading day, news hit that Iran and Oman are drafting a protocol to monitor transit through the strait. Iran's deputy foreign minister said tanker traffic should be "supervised and coordinated" between the two countries. The market immediately spiked higher and oil prices fell.

Oil didn't stay down for long and rebounded back near the highs at the close, but stocks didn't seem to care too much. The indices closed with some positive action, which is a bit of a surprise given the risk of a three-day weekend ahead.

What the Action Means

The positive read on this is that Iran is trying to find some way to allow oil shipping. They may try to extract a toll and many nations will not want to deal with them, but there is no benefit to Iran in cutting off all oil shipping entirely.

Technically, the action today was positive and leaves us in position for a potential follow-through day next week. However, headline risk remains substantial and the problem of oil is not going to go away quickly or easily. The market handled the spike in oil prices better than expected today but even if there is progress toward a resolution of Iran, the oil issue will persist for months.

My Game Plan

As I mentioned, I raised some cash on Wednesday and feel well positioned to aggressively pursue some new buys if we see upside follow-through next week. My main focus is staying flexible in what is likely to be a volatile environment. We do have some clear support levels and there are some strategists that believe that Monday morning is a low that will hold.

My best wishes for the Easter holiday. I will see you on Monday.

At the time of publication, DePorre had no positions in any securities mentioned.