Momentum Monday - What and Who To Believe?

I follow price over news and headlines always, but the markets are hard to read because if oil spikes and markets tank, you can expect Trump to ‘truth’ that the end of the war is minutes away.

It feels like a slow motion crash right now because everything feels manipulated and it is why I wrote on Friday ‘Is It Too Late To Panic’.

The downtrend continues. Every slight bounce is getting faded. SPY and IWM have now been rejected near their declining 10-day moving average multiple times in the past couple of weeks. QQQ was rejected near its declining 20dma and closed below its 200dma. This is the definition of a steep downtrend.

In the meantime, energy prices are holding a bid. XLE keeps making new highs. The market doesn’t believe the promises for a short war anymore.  Words are not enough when a reputation has been tarnished. Now, it wants action. 

The Fed kept interest rates the same. Why should they cut them? Inflation numbers are coming way above estimates. Crude oil, gas, and fertilizer prices staying near their highs will only elevate inflation expectations. No wonder why Treasuries are getting hit, too. The Fed might be able to control the yield on the short end of the curve, but it can’t on the long end – the market decides how much it will pay. The last time both equities and Treasuries declined together was in 2022.

The silver lining of the current correction is that it can easily highlight future winners. Last week, we saw fiber optic and memory chip stocks shine amid the selloff. If something doesn’t fall when the general market is dropping, it is probably getting accumulated. This doesn’t mean buy them now. If the indexes accelerate lower, everything will be hit during panic selling. If you buy too early, you will be stopped. All of those stocks could easily test their rising 50 and 200dma in a steep market correction, and they are a long way from there. Just look at PLTR and HOOD in March-April of 2025, when they dropped about 50% and are still staying above their rising 200dma. I still think that we haven’t really seen any real panic selling, which is required by definition for a sustainable bottoming process.