The market has finally broken out of its trading range. But the question now is whether this move matters more than the reason behind it. When markets decline from record highs, history shows they rarely crash immediately. Instead, the pattern is consistent: an initial pullback, a recovery attempt, and only then, if that recovery fails to reach new highs, does the real trouble begin.

This week brings that critical test. The conflict in the Middle East has sent oil soaring to levels not seen in years. Meanwhile, beneath the surface, we were already witnessing warning signs. Employment data deteriorated sharply. Consumer stress intensified, with record numbers of workers tapping 401(k) plans just to avoid foreclosure. The Atlanta Fed slashed its GDP forecast by a full percentage point.

Yet paradoxically, the AI story remains intact. Companies continue committing hundreds of billions to infrastructure, with visibility now extending well into 2028. Cybersecurity stocks may have just hit a turning point after months of underperformance.

So which narrative prevails? Does the Trump Administration stand firm on its Iran policy despite surging energy costs in a midterm election year? Can the labor market stabilize after losing 92,000 jobs? Will the technical breakdown below key support levels trigger further selling, or does this represent the buyable dip that historically follows initial selloffs from peaks?

These are the questions that will define the coming weeks. Let's examine what happened, what we believe comes next, and where the best opportunities might emerge.

The S&P 500 fell 1.89% to close at 6,740 as markets absorbed the outbreak of war between the US and Israel against Iran. On February 28th, military strikes assassinated Supreme Leader Khamenei, triggering one of the largest disruptions to global energy supply in modern history. As Iran found itself outmatched militarily, the strategy pivoted to economic warfare through closing the Strait of Hormuz, effectively halting close to 20% of the world's oil supply.

The ripple effects spread rapidly. US gas prices climbed toward $3.50 per gallon, jet fuel prices surged, and Europe and Asia faced fuel shortages. President Trump attempted mitigation through a new $20 billion insurance program via the US Development Finance Corporation, but oil futures still surged as much as 35% on the week, posting their largest weekly gain on record.

Despite the chaos, price action remained surprisingly orderly from a technical perspective. The gap lower on March 6th led the S&P 500 to a low of 6,711 before rebounding back above 6,750 during intraday trade. This came with a cross below the 6,776 daily bottom Bollinger Band and a bounce off approximately 40 support in the daily RSI. The daily top Bollinger Band shifted up to 6,980, setting up potential for a move back above 6,900 if oil prices stabilize.

The US economy lost 92,000 jobs in February, well below expectations of a 58,000 gain. This marks just the second monthly job loss since the 2020 pandemic, even as the unemployment rate remained flat at 4.4%. The sharp decline shocked investors and raised immediate questions about the strength of the economic expansion.

More concerning is what these numbers reveal about consumer stress. The losses come at a time when Vanguard reported a record 6% of workers took hardship withdrawals from 401(k) plans in 2025, with the top reason being to avoid foreclosure or eviction. Money has been flowing out of private capital markets, and emergency withdrawals from retirement accounts suggest households face mounting financial pressure.

The Atlanta Fed responded by slashing its first quarter GDP forecast to 2.1% from 3.2%, a significant drop that suggests economic momentum is fading faster than anticipated. While still positive growth, the trajectory points to continued deterioration that markets will watch closely for signs of recession.

We had been observing underlying weakness in market internals before the Iran conflict erupted. The S&P 500 finally closed below support that had held for three months, breaking down from what had been a consolidation range. For us, this breakdown makes the trading setup clear: below $677 for the S&P 500 SPDR suggests further downside toward $650, while a move back above $677 would indicate the path of least resistance is higher.

That said, we think it's important to remember that markets don't simply crash from all time highs. The structure itself prevents immediate collapses from peaks. Tops always feature normal pullbacks, and those pullbacks serve as either corrections before continuation to new highs, or the initial decline of a larger move lower. At this early stage, investors generally still believe the bull market is continuing and continue to buy dips.

The critical signal comes only when a subsequent recovery fails to return to new highs. That failure becomes the initial phase of a much bigger move down. Which means the initial selloff from all time highs should be bought. The only questions are when to enter and how long those positions can be held.

The technical breakdown below $677 for the S&P 500 SPDR has created a clear short term trading framework. While targets aren't meant to be exact, the break below this support level opens room to fall toward $650. Conversely, a move back above $677 would suggest the path of least resistance shifts to the upside.

We believe the breakdown occurring before the Iran conflict matters, even though the subsequent spike in oil ultimately pushed the market below support. Last week brought disappointing economic data that helps explain the underlying weakness and multiple Hindenburg Omens we had been observing. The payroll report disappointed with a 92,000 job loss, and retail sales for January came in weak. Both can be attributed to winter storms, but the result was a sharp drop in the Atlanta Fed's GDP forecast.

The question now centers on which side capitulates first. Does the Iranian government get overthrown or surrender, or do the US and Israel back down amid rapidly surging energy costs in a pivotal midterm election year? We think the Trump Administration will not deploy ground forces in Iran and this will not become a multi month war. Such an outcome conflicts with too many of Trump's policy objectives: lower energy costs, lower inflation, positioning as the peace president, and delivering $2.00 per gallon gasoline.

The long term picture for markets remains vastly unchanged in our view, with AI serving as the fuel of the bull market. Over the short term, market direction will be determined by how quickly the Middle East situation resolves and whether oil prices cool down from current elevated levels.

Despite market volatility, the AI story continues gaining momentum. Recent earnings from Broadcom provided crucial insights into the sustainability of infrastructure spending. The company builds custom silicon for six major customers and maintains deep strategic multiyear engagements, giving visibility two to four years out on anticipated demand.

Most importantly, Broadcom confirmed that server demand visibility extends well into calendar 2027 and beyond. When asked specifically about growth in 2028, CEO Hock Tan simply said yes. The company's fiscal 2027 ends in January 2027, so calendar 2027 represents their fiscal 2028. This extended visibility provides confidence that AI infrastructure buildouts will continue for years.

Perhaps more significant was commentary about connectivity. The market had become convinced that high speed AI data transfer would require optical connections. However, Broadcom made clear that direct attached copper remains the preferred solution through their technology roadmap. As cluster sizes expand, customers want to stay on copper because it offers the lowest latency, lowest power, and lowest cost. This should benefit companies like Credo Technology and Astera Labs that focus on copper connectivity solutions.

Perhaps the most interesting development of the week involved cybersecurity stocks. After months of underperformance, this group may have just capitulated. The percentage of stocks within the Cybersecurity ETF fell below levels seen after Liberation Day in February, and the stocks soon followed. However, they have since bounced back strongly, with 70% currently outperforming the S&P 500 since reporting earnings.

Meanwhile, sentiment remains low. As a percentage of stocks with bullish sentiment, cybersecurity stocks remain the most out of favor group. Trendline resistance sits overhead, but with sentiment still coming off lows, there's fuel to push above and signal continued outperformance for the remainder of the quarter. This creates an interesting setup where improving fundamentals meet depressed sentiment.

WTI crude for April 2026 delivery closed the week 35% higher at $90.96 as the war with Iran rapidly escalated, leading to an effective closure of the Strait of Hormuz for the first time in modern history. As prices rose, Qatar's energy minister warned that Gulf energy producers may need to call force majeure in coming days, shutting down production in a move that could send oil to $150 per barrel. The conflict could bring down the economies of the world, he cautioned.

On Friday, Iran stated it has not entirely closed the Strait of Hormuz, but ships linked to the US or Israel are not allowed to pass. This failed to alleviate the surge in crude prices. President Trump's announcements that the US Development Finance Corporation would insure ships and the US Navy would help escort vessels also failed to contain the breakout in price.

We elected to take a neutral outlook into the weekend as price action into Monday's open is effectively a coin flip. The lack of de escalatory rhetoric on both the economic and military fronts would likely send WTI crude toward $100.00 as soon as this week, while movement in the opposite direction would send prices sharply lower.

It's clear this conflict will linger, and even if it ends immediately, Gulf countries and the Strait of Hormuz will take time to reach full operating capacity again. From a fundamental perspective, we expect the near term spike in prices will ultimately need containment, particularly as 2026 is a midterm election year in the US.

On the technical front, just about every indicator is now overbought, with a daily RSI of 90, a cross above the $81.90 daily top Bollinger Band, and the lack of a higher low since the $63.60 low on February 26th. However, during wartime markets, the technical picture becomes far less important than typical conditions. We remain neutral on oil prices and will reassess a potential new setup early this week.

Natural gas prices for April 2026 delivery ended the week 11.23% higher at $3.17 after QatarEnergy declared force majeure on LNG deliveries, taking 11 billion cubic feet per day of LNG capacity offline. President Trump posted on Truth Social on Friday that there would be no deal with Iran except under unconditional surrender.

Qatar ranks as one of the world's largest producers of LNG, with significant volumes going to Asian and European markets. This has driven US prices higher as markets begin pricing in increased demand for US production and supplies. However, fundamentals in the US have been rather soft as we head into spring. Thursday's storage report showed a 132 billion cubic feet withdrawal for the week ended February 27th, expected to be followed by waning double digit declines or even a surprise early season increase in stocks.

Weather driven demand is expected to stay light, with highs in the 60s to 80s across the southern half of the country over the next week. Meanwhile, Lower 48 production is estimated to hold near 110 billion cubic feet per day in the coming week, close to record highs. The price action in natural gas was far less severe and volatile than crude oil. After bottoming at $2.78 on February 27th, prices inched higher early last week and rose to $3.28 on March 6th.

This pattern was followed by a narrowing of the daily top and bottom Bollinger Bands to $3.34 and $2.76 respectively, while the daily RSI rose directly into approximately 48 trendline resistance. This does not appear to be a trend reversal in natural gas prices. We may begin leaning back into a bearish position in the week ahead barring a major shift in the fundamental backdrop. For now, we maintain a neutral outlook as we await more clarity on the situation in the Middle East.

Gold prices for April 2026 delivery closed the week 2.08% lower at $5,171 per ounce. Softer US payrolls data kept hopes for a Federal Reserve interest rate cut alive, though a stronger dollar capped gains and left the metal on track for its first weekly decline in five weeks. Despite rising uncertainty, the US Dollar Index rose above 99.50 for the first time since December 2nd.

While gold serves as a global safe haven, during times of war the US Dollar frequently becomes viewed as a primary safe haven asset. This creates a push pull relationship with gold. As the Dollar Index nears 100.00 and gold prices lose momentum, we continue to see the case for gold falling back below $5,000 as the path of least resistance.

While uncertainty is high, much of what we're seeing in global capital markets has been anticipated and priced in for some time. From a technical perspective, gold futures began the week with a sharp rally, rising to a high of $5,434 on March 2nd. This brief move came with a cross above the $5,352 daily top Bollinger Band and a rejection of approximately 65 resistance in the daily RSI, which ultimately led to gold turning negative on the week.

We think this has formed the most recent lower high in the near term downtrend for gold, following the $5,627 record high on January 29th. Gold prices rejected downtrend resistance for three consecutive daily sessions last week, between March 4th and 6th. This now opens the path for a retest of long term channel support at $4,950.

As we look ahead, we expect early downside this week to confirm the March 2nd lower high and open the path for a break below last week's low at $5,005. We remain bearish on gold with a $4,800 target and $5,450 stop loss.

On Thursday, March 12, 2026, Ulta Beauty will report fourth quarter results and provide guidance for the coming fiscal year. This has raised concerns going into earnings because in the previous two years, when the company gave its initial fiscal year outlook around this time, it provided guidance below estimates.

However, we think this year will be different. The addition of Space NK in July has performed strongly during the holiday period, allowing Ulta to compete on the higher end with Sephora. Square footage growth within stores is accelerating, which should allow the brand to grow in the high 20% range and exceed estimates for the year.

For the quarter, company guidance called for comparable sales to grow in the 2.5% to 3.5% range. The consensus estimate already sits above that at 4%. When estimates exceed guidance, it typically indicates additional upside because it suggests the company tracked better than previous expectations. The question becomes how much the company will beat rather than whether it will beat guidance. We think this positions comp sales in the 6% to 7% range, which should also result in an earnings beat.

This setup has resulted in an Earnings Whisper Score of plus 5, and sentiment remains bullish going into earnings. When the company has beaten consensus estimates and provided in line guidance in the past, the stock traded higher by an average of 1.7% during the four days leading up to earnings, and gapped higher by an average of 3.5%. It was higher 79% of the time under this scenario.

We expect the company's guidance will bracket consensus estimates, which would be a positive development after giving guidance below estimates around this time the last two years. The combination of strong fundamental momentum, positive sentiment, and favorable setup characteristics creates what we view as an attractive opportunity ahead of Thursday's earnings release.

From a technical perspective, Ulta stock currently trades with favorable characteristics. The daily technical indicators show room for upside momentum, with the recent pullback allowing indicators to reset to healthier levels. The overall trend continues to point toward higher prices in our assessment. We think Ulta represents a compelling setup for those seeking exposure to consumer discretionary ahead of earnings.

We are modestly net short the overall stock market. Within equities, we hold long positions in Credo Technology and Astera Labs. These holdings reflect our conviction in copper based connectivity solutions for AI infrastructure, particularly following Broadcom's commentary that customers will continue preferring direct attached copper over optical solutions through their technology roadmap extending into 2028.

The thesis for our AI infrastructure holdings has been reinforced by visibility into sustained server demand. Broadcom's deep strategic engagements with six major customers provide line of sight two to four years out. This massive and growing capital deployment creates a favorable backdrop for companies supplying essential connectivity components, particularly solutions like PCIe retimers that pair with the latest generation of accelerators.

We have not made changes to these positions during the past week. The recent volatility in technology stocks, including some pressure in our AI infrastructure holdings, appears healthy after strong runs. We view near term weakness as potential opportunity to add to positions rather than a signal to reduce exposure, provided the fundamental thesis remains intact based on continued spending commitments.

Our overall positioning reflects the current environment: we believe the initial selloff from all time highs should be bought, but we recognize the breakdown below technical support creates near term downside risk. The key level for the S&P 500 SPDR is $677. Below this level suggests path toward $650, while above points to $700 and higher.

We think the Middle East conflict will not become a prolonged multi month war, as such an outcome conflicts with multiple Trump Administration policy objectives. The question centers on timing of resolution and how quickly oil prices can normalize from current elevated levels. We maintain a neutral stance on crude oil and natural gas until the situation provides more clarity.

For gold, we remain bearish with a $4,800 target and $5,450 stop loss. The recent technical correction and Dollar strength create what we see as further downside toward channel support. In Treasury markets, we expect yields to decline despite the recent backup following geopolitical events, as weakening labor market data forces the Fed to maintain its accommodative stance.

The longer term picture remains constructive in our view. AI infrastructure spending shows no signs of slowing, with visibility extending years into the future. Cybersecurity stocks appear to have capitulated and may be setting up for a strong recovery. The labor market bears watching closely, as deterioration there could force policy response that ultimately supports risk assets.

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