Market Noms — Curated Market Digest #20260423

https://medium.com/@marketnoms/market-noms-curated-market-digest-20260423-18a52620738b

Hello to all readers and welcome to Market Noms. I doubt there are any readers. This will serve as merely a collection of my thoughts as I divulge my investing and speculative standpoint. I hope to remain consistent in order to both sharpen my writing and keep myself disciplined. Thank you for coming.

Wow, a lot has happened in the short 77 days since I last wrote (since the end of the late-January Silver short squeeze). On the last day of February, the U.S. and Israel began launching airstrikes on Iran, killing their supreme leader and other notable Iranian leaders. This lead to Iran attacking merchant ships in (and the effective closing of) the Strait of Hormuz and caused a brief but significant spike in Oil prices before President Trump declared a 2-week ceasefire on April 7. Now, two weeks later, Trump extended the ceasefire, though no permanent peace agreement or resolution for the Strait had been reached.

The price action in equities has been incredible throughout this 77 day period, too. Right after my #20260205 post, on February 6th, the Dow crossed 50,000 for the first time leading to the infamous Pam Bondi remark on February 11th: “The Dow is over 50,000 right now… That’s what we should be talking about” (in reference to her department’s handling of the Epstein files and victims.. very relevant, right?). Following that statement, the Dow spent the next month and a half dropping nearly 11%, shedding almost $5,500. The market remained in turmoil basically until the April 7 ceasefire announcement.

Since the ceasefire announcement, the equities market embarked on an absolute tear, as I am sure you must have noticed. For the remainder of the post, I will be switching back over to the S&P 500, but both SPX and the Nasdaq saw a rally that spanned 13 consecutive days of higher closes where SPX gained over 13% and notched a new ATH. Social media users on X and Reddit were buzzing, as perma-bulls jeered any “doomsday posters” who were following the macros. Short positions and puts were completely wiped out in what I heard referred to as “one of the most hated rallies”. Prior to this period, a 12 consecutive day streak was recorded only five times. There is only one other period (1987) where a 13-day streak had been observed, aside from the record 14-day streak in 1971. This truly was a rare and almost unfathomable rally that saw the SPX trade from 6300 to 7100 with zero pullbacks and gaps on nearly every cash open. I mention “doomsday posters following the macros” so I do want to dive into a few items that are at play here and should not ignored.

First, a lot of attention is on the price of Crude Oil which surged over 55% during the first month of the Iran conflict. I don’t need to tell you that our country and consumer metrics like inflation are directly affected by oil but it obviously does need to be reiterated that oil prices do significantly impact the stock market. From a forward looking perspective, if companies have a ton of planned expenditures into AI infrastructure and data centers alike, higher oil prices will undoubtedly increase any planned or expected spending. Brent crude was trading somewhere between $70–75 early on in the year, but following the joint U.S.-Israeli strikes at the end of February, oil markets immediately surged 10–13% to $80+ to start March. When Iran effectively closed the Strait of Hormuz, supply shocks hit the market and price action really picked up. On March 9, Brent surged to nearly $120 and stayed near $112 until late in March. Once the ceasefire announcement was made, Brent predictably retraced back down and remained volatile during the initial two week period. It is now climbing to just slightly below $100. You probably have noticed that you have been spending significantly more at the pump during the last few months. I don’t want to get too much into the geopolitics of the Strait of Hormuz and its effect on the global oil supply so I will leave it at that.

Second, many are calling out the the low volume that is behind the current rally. Already in most cases, green days and periods do tend to have lower volume than the big red days — and that makes sense because market rallies are determined by the relationship between the absence of sellers vs. the presence of buyers. But when large financial institutions (big money) are not selling aggressively, rallies on low volume often occur where retail traders and algorithms can push pries higher with little resistance. If we are making new ATHs in price but volume is making lower highs (AKA bearish divergence), it suggests that “big money” is potentially sitting out or they could be distributing. The Wyckoff Method describes how large institutions typically move markets and one such phase is Distribution, which is when big banks/institutions (big money) use the low-volume liquidity to offload long positions to retail investors suffering from FOMO. Between the initial push to ATHs in February and the 13-day rally, it is looking very clearly like a bull trap designed to trap these late-coming retail bulls. We are now starting to see lower volume where demand is drying up at these current valuations. I think there can be one or two more tests of these high levels but we could very well be staring at a re-test of the several SMA levels on the way down. 50SMA sits around $300 below current SPX and 200SMA sits around $400 below.

The last element worth mentioning is that the VIX has been crushed, and has remained low, suggesting extreme complacency. VIX tagged below the 17 level on April 17th, which coincides roughly with the SPX peak. Early on in the Iran conflict, VIX reached as high as 35.3 so we are talking about a VIX crush of over 50%. Today, April 23rd, the VIX briefly touched above 21 before closing at 19.3, so although VIX drifted lower, we are starting to see some of the complacency and demand at these levels break. Once VIX breaks out of this base, the market will roll over once realization and fear hits retail investors. I think there is merit to a lot of what the “doomsday posters following macros” have been saying. VIX, to me, looks to have normalized too quickly while structural risks with Oil remain. In fact, OVX, or Oil Volatility, is actually quite elevated. Equity investors are pricing in a “thread the needle” moment with a perfect landing and a contained Middle East conflict while the energy market is pricing in an oil supply crisis. It seems more likely that “big money” can artificially bring VIX low and encourage retail to FOMO into this rally. If VIX were at 30 for example, we would likely not see this level of FOMO with SPX sitting at 7100. Once retail is trapped, they can be the final buyers needed for institutions to exit their positions. VIX is already flirting above 20 and I am anticipating the likely outcome that there will be a high-volume price drop soon that will be accompanied by VIX clearing 25–28 in a single session.

Parting thoughts: I am long equities and will be until the day much longer in the future. I don’t attempt to time the market and I don’t sell/buy-back large %s of my portfolio. I DCA and sometimes I will accelerate my DCA purchases and sometimes I turn it off for periods at a time. Today, I am looking to significantly lower and stop any DCA purchases for a bit, until or unless my following theory is proven invalid.

There are actually so many significant headwinds we are facing that any future drawdown can have serious momentum. First, tech earnings are upon us and can easily highlight the potential AI bubble we are in. If a major AI titan misses earnings, the low-volume floor at these valuations vanishes instantly. Second, if the energy shock does not resolve, a “Higher for Longer” interest rate regime is definitively on the table. The markets already began pricing out all rate cuts in 2026 and just two days ago, President Trump wildly told CNBC he is “in favor of interest rate rises to stop inflation.” 10-year yields have been sticky (and high) while the US is spending at record levels (with declining GDP), so it’s hard to say that a “flight to safety” would include buying US assets. Last, consider metals and rare earths. I know prices are not actively squeezing now but BRICS+ nations (Brazil, Russia, India, China, South Africa, and others) have stayed aggressive in controlling the supply. Everyone knows about Gold, Silver, and Copper, but with the AI boom, Platinum and Palladium are also seeing significant demand. US companies are actively staring down the barrel of shrinking margins as the cost of raw materials (chips, batteries) are becoming geopolitical bargaining chips.

That being said, I don’t normally set targets so this is not a target and this is really just for fun. I think this markdown could have the legs for a significant drawdown and one level I am considering is 573.25. On Friday, May 23, 2025, President Trump threatened a 50% tariff on the EU and a 25% tariff on iPhones made outside the U.S. In the pre-market session, $SPY touched 573.25 but the market essentially went parabolic since then, fueled by resolution of tariff conflicts and the AI boom. 573.25 represents the absolute limit of bearishness from that cycle. If you anchor a Fibonacci retracement level here and treat current levels (~712) as a 1.618 extension, that interestingly sets our 1.000 level at just around 659, which also happens to be where our gap exists from the April 7 ceasefire announcement. These are not my price targets. Gun to my head, if I had to give my thoughts (I go confluence levels 626.39 and 712.35): $692 would mark a very shallow retracement (0.236), $679 would be a moderate pullback (0.382), $669 is the psychological midpoint (0.500), and $659 would be the key level to retrace to. Any move beyond this would be a very deep pullback that brings 573.25 into play.

I do not know everything. I am not an expert. I am a normal dude writing my thoughts and often get things wrong and lose money. I may own, purchase, or sell any assets or securities mentioned in my writings at any time. My writings are not a recommendation to buy or sell any stocks or securities. Positions mentioned in writings can and will lose me money in the future. My investment in positions can change immediately as soon as I publish writings, with or without notice. Do not make decisions based on my writings. I cannot guarantee accuracy or completeness of my writings. These are not the opinions of any of my employers. I do my best to be honest about my disclosures and cannot guarantee I will be correct in any assumptions or predictions. These writings are merely a collection of my thoughts as I divulge my investing and speculative standpoint. My main focus is to keep myself disciplined and sharpen my writing. I will often get things wrong. I mention it three times because it’s that important.