Iran Rebuffs U.S. Plan, Tech Gets Smacked, Chart Looks a Bit Ugly

Market_Recon_TSP1_KL

Good Morning! Friday. You've made it. Haven't you? Thursday was brutal. The Nasdaq Composite gave up a nasty 2.38% for the session and is now down 1.11% week to date and down 5.56% month to date. That comes after a month of February that was down 3.38%. Yikes. The S&P 500 gave back 1.74% on Thursday and is down 0.45% for the week as well as 5.84% for March after surrendering 0.87% in February. The S&P 500 is now staring at a potential fourth consecutive weekly loss and six weekly losses in the past seven. Ouch.

Readers will likely recall that just 24 hours ago, in this column, we decided after working through the chart that U.S. equity markets had failed to post a confirmation of a bullish trend reversal on Wednesday due to the lack of trading volume behind that rally. Thank goodness we made that call. Crude oil was the catalyst behind the selloff on Thursday. Tensions escalated between the U.S. and Iran as that nation appeared, depending on who is actually in charge, to reject the Trump administration's 15-point plan and respond with a five-point plan of their own.

In the meantime, Iran's military continued to launch missile and drone attacks at its neighbors and at Israel amid rumors that Russia was trying to arm Iran. As oil prices soared, stocks sold off sharply, particularly across the technology space as that group was hit with headlines stretching beyond the war in the Middle East. Investors and traders also sold U.S. Treasury debt securities forcing a spike in yields. The Ten-Year note paid as much as 4.42% late Thursday, up nine basis points and is paying more than 4.46% as I work through the zero-dark hours on Friday morning.

Friday Night

Stand in line - No! No!

Wasting time - No

Friday night, Friday night

I just got paid - no sleep til Monday

Friday night, Friday night

Who cares, it's only money

- Wray, Sigerson, Mahassen, Dean (Loverboy), 1985

Are Futures Markets Stabilizing?

Major U.S. equity index futures appear to have somewhat stabilized overnight despite the Pentagon reportedly considering the deployment of an additional 10,000 ground troops to the CENTCOM region on top of those infantry Marines and soldiers from the 82nd Airborne Division already on location. This stabilization appears fragile at best.

Why? For one, Pres. Trump has described talks with who he sees as Iran's leadership as "going very well" and has paused the highly publicized attack on Iranian energy infrastructure out to April 6. On top of that, and this is breaking as I write, the U.S. Senate has passed legislation that would fund most of the Department of Homeland Security.

This bill, if passed, would end the partial government shutdown. It appears that funding for ICE and the Border Patrol remains a political football (ICE has already been funded through other legislation), but the rest of the department will reopen once the House passes the bill and it goes to the president for an autograph.

Broken Market Model

The Nasdaq Composite, after that 2.38% beating, closed 10.9% below its Oct. 29 high, entering what many consider to be official correction territory. I have often argued that since algorithms have replaced humans at the point of sale and since 5% and 10% intraday moves have become common for individual stocks, that these parameters (10% correction, 20% bear market) need to be adjusted. It might be difficult to remember at this point, but back when humans still ran the show, intraday moves of 2%-plus were very rare. What investors once paid for in commission, they now pay far more for in a sloppy price discovery process and an intentionally inefficient market model.

Attack on Tech...

Eight of the 11 S&P sector SPDR exchange-traded funds closed in the red on Thursday, as technology (XLK) took a 3.11% beating and communication services (XLC) were hit for a loss of 2.36%. Energy (XLE) led the winners for the day for obvious reasons. Within tech, the Philadelphia Semiconductor Index gave up 4.79%, led lower by Sandisk (SNDK) , Applied Materials (AMAT) and Advanced Micro Devices (AMD) . Those three stocks surrendered 11%, 8.3% and 7.5% respectively.

Still within tech, the Dow Jones U.S. Software Index lost 1.22%, led lower by AppLovin (APP) , which was down 10.4%. Within communication services, the Dow Jones U.S. Internet Index gave back 4.42% as Reddit (RDDT) was punished for a loss of 8.9% and Meta Platforms (META) suffered a beating of 8%.

Tech was hit with a one-two punch. First, Meta Platforms suffered defeats this week in two separate trials involving child safety. The second of the two decisions landed on Wednesday afternoon when a jury in Los Angeles decided that Meta Platforms (the parent company of Facebook and Instagram) and Alphabet's (GOOGL) Google were responsible for inducing addictive behavior in a young woman who began using social media as a child.

The case ended up blaming sites like Instagram and YouTube for a number of issues this individual eventually developed and raised issues that in the eyes of investors, social media could be the new "tobacco" opening the door to a plethora of coming lawsuits.

Additionally, a Google researcher published a report that more efficient AI models might dampen the anticipated increase in demand for memory chips. This put the whammy on Micron Technology (MU) Western Digital (WDC) and Sandisk as well as on semiconductor equipment providers such as Applied Materials and Lam Research (LRCX) .

Breadth

On Thursday, losers beat winners at the NYSE by a five-to-two margin and by about five-to-three at the Nasdaq. Advancing volume took a 32.6% share of composite NYSE-listed trade and a 32% share of composite Nasdaq-listed activity. So, instead of the confirmed bullish reversal of trend that we almost had on Wednesday, did we experience a reconfirmation of the bearish trend on Thursday?

Not exactly. The lower trading volumes that prevented the bullish confirmation two days ago also prevented any reconfirmation yesterday. That said, the chart is not pretty. The major indexes made new lows and new closing lows for the week on Thursday. In addition, the S&P 500 has been rejected at its all-important 200-day simple moving average twice this week, both on what had been "up" days. Lastly, the indicators are not pretty. Relative strength is weakening again and appears headed for technically oversold territory. Below the chart, the daily moving average convergence divergence is postured in an overtly bearish way and looks to be weakening.

Anyone Else Notice That...

Analysts at Wells Fargo (WFC) reiterated their medium to long-term bullishness on gold and forecast year-end prices of $6,100 to $6,300 per ounce. Front month gold futures are trading at $4,435 per ounce this morning.

Metamophoses: Book The Eighth (excerpt)

NOW shone the morning star in bright array,
To vanquish night, and usher in the day:
The wind veers southward, and moist clouds arise,
That blot with shades the blue meridian skies.
Cephalus feels with joy the kindly gales,
His new allies unfurl the swelling sails;
Steady their course, they cleave the yielding main,
And, with a wish, th' intended harbour gain.

-Ovid (43 BC - 18 AD)

Economics

(All Times Eastern)

10:00 - U of M Consumer Sentiment (Mar-F): Flashed 55.5.

10:00 - U of M One-Year Inflation Expectations (Mar-F): Flashed 3.4%.

10:00 - U of M Five-Year Inflation Expectations (Mar-F): Flashed 3.2%.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 552.

1:00 - Baker Hughes Oil Rig Count (Weekly): Last 414.

The Fed

(All Times Eastern)

11:30 - Speaker: San Francisco Fed Pres. Mary Daly.

11:40 - Speaker: Philadelphia Fed Pres. Anna Paulson.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: (CCL) (.18)

At the time of publication, Guilfoyle had no position in any security mentioned.