Published March 20, 2026
This week the stock market returned to its long-term 10-week trendline. It was the first visit to this trendline in about a year. We see the blue line below providing support for the index since the market’s most recent rally kicked off at the beginning of 2023. Investors now look to see whether this trendline ultimately provides support once more. Or whether the myriad of market headaches leads to a more pronounced selloff. We saw a dramatic selloff a year ago on the market’s Tariff Tantrum. But just as quickly, stocks reasserted their trend. This time, the market worries are broader. As we noted last week, we are somewhat amazed that the market has held up as well as it has, given the potential impact of the various negative issues floating around. That said, several sectors have already experienced significant drawdowns.
Here is Delta Research’s note of the current state of things:
“The S&P 500 is trading at roughly the same level as it was in mid-September and is down over 3% year-to-date. The NASDAQ is down about 2% and the DOW is up roughly 0.5%, but both have given back larger gains.
With inflation and uncertainty up, a relatively flat stock market could be considered a victory. On the other hand, the S&P 500 has clearly lost its upward momentum, down by ~6% from its January high and breaking its 200-day moving average. For value investors, the market is becoming more attractive: earnings have risen in the past six months while prices are unchanged. For trend-following investors, loss of momentum is a red flag.
The KBW Bank Index ETF (KBWB) is down over 8% year-to-date and about 15% since the mid-February high. It suggests that an increasing number of investors are becoming more concerned about private credit defaults and the impact of a possible $120/barrel crude oil price.
From a stock market perspective, any “victory” in Iran ultimately needs to include freely flowing oil through the Strait of Hormuz. Energy is a basic input to most economic activity whether in manufacturing (fertilizers, aluminum, plastics and petrochemicals, helium used in semiconductors, medical equipment, etc.) or transportation. Constrained supply and persistently high prices have the potential to significantly weigh on economic growth if they last too long.
When the Iranian conflict ends and energy prices normalize, the stock market is likely to snap back into growth mode. The difficulty is it’s unclear when this might happen. We listened this week to retired admirals, generals and CIA officers discuss the likely trajectory and duration of the conflict. There are as many opinions as there are retired experts.
President Trump states that U.S. involvement is near its end. The decision to reschedule his trip to China by five weeks may suggest that US involvement concludes before then, aligning with the Administration’s earlier timeline of 4 – 6 weeks.”
Our models will rely on the tried-and-true method of measuring price and volume responses to gauge what happens next.
Market Update
Stocks once again had a positive Monday session with the broad market averages rising +1%. Hopes that the Strait of Hormuz could be reopened to oil and gas shipping traffic brought oil prices down. But further attacks on energy infrastructure in the Persian Gulf area sent oil prices higher again Tuesday. Stocks responded in a muted fashion with a +0.5% gain for the Nasdaq. The Federal Reserve meeting concluded Wednesday with the central bank leaving rates unchanged. Higher inflation readings on Producer Prices fed into Fed Chair Powell’s comments that rising oil prices “could cause trouble for inflation”. Bad news on inflation and interest rates sent stocks down -1.5% for the day. Interest rates rose again Thursday while precious metals fell sharply. The sudden drop in precious metals potentially suggests forced liquidations among some margin-heavy investors as both stock and bond market prices are falling in unison. Thursday saw a modest -0.3% dip in stocks after morning selling had the indexes down -1%. Strong earnings from semiconductor memory company Micron failed to excite nervous investors. Friday brought another surge in oil prices and an even larger jump in interest rates as risk-averse investors sought cash. Stock indexes fell below their 200-day moving averages – a worrisome technical signal for investors. The Nasdaq 100 (QQQ) closed with a -1.85% loss for the day. Banks and financial stocks notably outperformed Friday on news of lighter regulations freeing up capital for loans, stock buybacks, and dealmaking.
A seemingly worsening situation in the Persian Gulf kept oil prices high and sent natural gas prices surging this week. Interest rates responded with a sharp move higher across all maturities as investors now believe the Federal Reserve will not likely have room to follow their planned rate cuts. The weight of those moves sent stocks to a fourth straight losing week this week. The S&P 500 (SPY) down -1.80%. The Nasdaq 100 (QQQ) lost -1.98%. Small cap stocks (IWM) fell -1.60%.
Warm wishes and until next week.