Markets are testing us right now. While headlines scream about geopolitical chaos and oil shocks, beneath the surface something fascinating is happening that most investors are missing.

The S&P 500 just posted its third consecutive weekly decline, yet investor sentiment has crashed to levels we typically only see at major turning points. History suggests these extremes don't last. But here's the question: is this just another dip to buy before new highs, or has the market finally put in a cycle top?

The answer may lie in what's happening away from the chaos. While oil grabbed headlines with its surge above $95 per barrel, the Trump Administration proved remarkably responsive to price spikes. Memory chip prices are exploding higher in ways that suggest the AI Revolution is accelerating in the background, heavily discounted by current market fear.

This week, we examine whether the recent breakdown is a bear market beginning or simply noise to ignore. We explore why oil may have already peaked despite ongoing war, how gold is setting up for its next leg higher, and which stocks are positioned to benefit as memory constraints drive pricing power to extreme levels.

Can the market bounce from oversold conditions while geopolitical risks remain elevated? The data suggests yes, but with important caveats you need to understand.

The S&P 500 declined 1.93% for the week, closing at 6,632, as the conflict between the US and Israel against Iran dragged into its third week. This marks the third consecutive weekly loss for the index, bringing it down significantly from recent highs. The ongoing war has created the largest disruption to global oil supply in history as Iran maintains its closure of the Strait of Hormuz, a critical shipping route.

From a technical perspective, the S&P 500 has remained relatively flat over the past four months, showing little net change since December 2025. Last week's decline pushed the daily RSI down to approximately 34 and came with a sharp cross below the 6,682 daily bottom Bollinger Band on March 13th. We think support exists in the 6,600 to 6,650 range, including the March 9th low of 6,636.

Despite the selloff, the market has remained relatively orderly given the geopolitical headwinds. Markets initially panicked on Sunday night when oil briefly spiked to $120 per barrel, sending the S&P 500 down 3%. However, messaging from the Trump Administration helped calm fears as officials signaled the war would end soon when oil prices rally too aggressively.

The key development is that markets now understand the Trump Administration will be highly receptive to oil price breakouts. This creates an implicit ceiling on crude prices as the government appears willing to take measures to contain them, including potential US Navy escorts for tankers.

Investor sentiment has plunged to its lowest level since shortly after Liberation Day last year. When sentiment turns this bearish, particularly when the change happens suddenly over a short period, the odds historically favor a bounce. Stocks tend to go higher most of the time, and sentiment generally leans bullish, so any time it turns genuinely bearish, conditions become more favorable for a reversal.

We measure this by looking at how sentiment changes over one quarter. When sentiment drops more than 10% during the quarter, stocks have been higher one week later 63% of the time, higher one month later 75% of the time, and higher three months later with a 78% success rate and average gains of 4.0%.

The important caveat is that during bear markets, sentiment can remain persistently low. Better signals come when sentiment drops suddenly rather than grinding lower. Looking at previous instances when sentiment reached current levels, each time resulted in a short-term bounce, though frequently there was at least one more drop before a bigger move higher materialized.

Market breadth has deteriorated significantly in recent weeks, but money flow data shows an interesting divergence. While capital was leaving the market earlier in the year and signaled the recent break below support, we have generally seen new money come into the market even as overall stock prices have fallen and breadth has weakened. This represents a sign of underlying strength.

Last week, Iran announced that Mojtaba Khamenei would become their new Supreme Leader, replacing his father Ali Khamenei. The new leader immediately stated that the Strait of Hormuz should remain shut as a tool to pressure the enemy. On Friday, Defense Secretary Pete Hegseth dismissed concerns about the passageway's closure, saying the administration has been dealing with it and there is no need to worry.

As US oil prices rise above $95 per barrel, economic models indicate that if current levels are sustained for three months, US CPI inflation would climb to approximately 3.2%. This would put inflation at its highest level since May 2024, creating pressure on the Federal Reserve and consumer spending.

It has become increasingly clear that Iran's strategy has shifted to simply surviving strikes and pushing oil prices higher, thereby pressuring the US, Israel, and their allies to end the war. Iran is now demanding reparations as part of any agreement to end the conflict, further leveraging the immense economic power they hold through control of the Strait of Hormuz.

We believe the current selloff represents a textbook pullback that may be setting up a favorable entry point. To the upside, we watch 6,800 as the near-term pivot point which would open the door for a move back into the top end of the recent range, near 7,000. We think investors should zoom out and ignore the noise from geopolitical headlines.

The strongest argument for a move to new highs from current levels is the fact that money has continued flowing into the market even as prices have fallen. This doesn't guarantee capital will keep coming in, but it is a sign of strength. Should the S&P 500 get back above 6,795, it would mark a reversal of the recent selling and likely confirm a move to new highs.

However, there are also plenty of signs suggesting the market has put in a cycle top. Previous selloffs coming off highs should be bought, and it is only once the subsequent bounce fails that a bear market truly begins. We expect volatility to remain elevated as markets digest the ongoing geopolitical situation.

Amid all the geopolitical headlines, we maintain our view that the AI Revolution is accelerating in the background. This theme is being heavily discounted right now due to mounting headwinds from the Iran conflict, but the underlying fundamentals remain extraordinarily strong. Stocks of companies with positive earnings have lagged those with negative earnings recently, but this oscillator has now fallen to a level that has often preceded a reversal.

Treasury yields hit a five-week high as investors looked past February inflation data, focusing instead on the potential inflationary impact of surging oil prices. The US Labor Department reported that February CPI inflation was unchanged at 2.4%, in line with expectations, while Core CPI inflation also held steady at 2.5%.

However, this data had little impact on markets as it doesn't capture the current period with elevated oil prices from the Iran war. Markets now see a 49% chance that there will be no interest rate cuts through October 2026, and a 39% chance of no cuts at all in 2026. This represents the most hawkish Fed outlook we have seen.

We believe expectations have become far too polarized in the hawkish direction, particularly as President Trump's new Fed Chair is set to start after Powell's term ends in May 2026. The recent surge in yields appears to be a temporary effect of the Iran war rather than a fundamental shift in the economic outlook.

Long-term inflation expectations are rapidly rising, which creates uncertainty but also supports gold prices. Once the dust settles from near-term volatility, we expect markets to begin pricing in the inflationary damage that has already occurred from the oil shock.

WTI crude closed the week 8.59% higher at $98.77 per barrel, rising to a high of $119.48 on March 9th as investors continued to assess the damage to the global economy from a prolonged closure of the Strait of Hormuz. This marks the highest level for oil prices since June 2022.

After the initial surge in oil prices on Sunday night, President Trump intervened by stating that the war would be over soon, and this helped calm oil markets, sending US oil prices below $80. However, by the end of the week, prices had recovered and rose toward $100 on Friday as it became less clear what the exact timeline of the conflict would be.

The most important development last week is clear evidence that the Trump Administration is now being highly attentive to surging oil prices. We expect the $100 level to serve as the psychological threshold where intervention becomes more likely, thereby capping oil prices over the next few days barring any major shift in the supply situation.

On Friday, Iran allowed two Indian oil tankers to pass through the Strait of Hormuz, and it appears that Iran-allied countries are able to at least partially export oil through the waterway. We expect this development to help contain oil prices in the near term.

Fundamentally speaking, it seems as though much of the worst-case scenario is already priced into current levels. The US is actively looking for ways to lower prices through measures such as potential US Navy escorts for tankers, and Iran is becoming more receptive to at least partially restoring oil flows through Hormuz.

Oil prices have been trading in severely oversold territory for weeks now, with the daily RSI back above 80, while the daily bottom Bollinger Band has collapsed to $52.19. While technical indicators become less relevant during periods of war and geopolitical crisis, we believe there is strong technical resistance in the $98 to $100 zone, as well as strong technical support in the $80 to $85 range.

We think oil prices are now setting up for a pullback. The combination of Trump Administration intervention at key price levels, Iran's willingness to allow partial tanker passage, and technical resistance all point to downside from current levels. Therefore, we expect a move toward $87 with risk managed by a stop above $105.

Natural gas prices ended the week 1.50% lower at $3.14 as investors looked beyond the war with Iran. Weak spring weather forecasts weighed on prices, with the National Weather Service's seasonal outlook calling for near-normal temperatures across the US from late March through May. Winter weather has moderated significantly.

Production is expected to hold at a near-record 109 Bcf per day. The EIA reported a 38 Bcf withdrawal from US natural gas inventories for the week ended March 6th, bringing total working gas storage to 1,848 Bcf. This is 8.3% above levels seen last year at this time but 0.9% below the five-year average.

Natural gas prices remain more than 10% above their recent lows prior to the Iran war, and we believe more downward pressure is coming as geopolitical risk premiums fade. Aside from the brief extreme cold period seen in the winter and the recent rally on the Iran war, the fundamentals behind the natural gas market appear quite weak.

The week began with an early breakout attempt, with natural gas prices rising to a high of $3.49 on March 9th, only to fall back into $3 support the next day after President Trump claimed it would be a short war with Iran. Since then, prices have rejected $3.30 resistance during two daily sessions and the daily RSI has rejected trend line resistance near 48.

We believe natural gas prices are now trading in a range between $3.30 and $2.80, with the top end of that range already being rejected. We expect prices to move toward $2.90 with a stop above $3.40 to manage risk.

Gold prices closed the week 2.91% lower at $5,022 per ounce as the US Dollar Index rose to its highest level since May 2025 amid mounting war concerns. It appears that gold has been weighed down by near-term headwinds caused by the war, but we believe the longer-term fundamental picture is even more bullish.

The US Dollar Index has now risen in a straight line since late January, crossing above 100 on March 13th. This came with a cross above the 100.10 daily top Bollinger Band and pushed the daily RSI above 73. This puts the dollar in its most overbought conditions in over one year, and we think the index is setting up for a sharp pullback.

Long-term inflation expectations are rapidly rising, which is supportive for gold, while uncertainty has hit some of its highest levels on record. Once the dust settles from near-term volatility, we believe gold markets are setting up for a move back into record high territory.

Central bank demand continues at historically elevated levels, geopolitical tensions persist globally, and real interest rates remain supportive despite recent nominal rate increases. The ongoing government concerns and fiscal uncertainty traditionally favor gold as a safe-haven asset.

Gold prices have traded rather strongly in our view, despite an extremely sharp rally in the Dollar Index. In fact, gold continues to hold long-term support at $5,000. The daily RSI is trading in the 45 to 50 support zone, and the daily top and bottom Bollinger Bands have shifted higher, to $5,325 and $4,935 respectively.

We are still forming higher lows, with the most recent higher low occurring on February 17th at $4,854, as dips remain brief amid the technical consolidation we are seeing now. This week, we expect further consolidation in the $5,000 to $5,100 range to set up for $5,200 and above as more clarity is obtained around the Iran war and markets begin pricing in the inflationary impact that has already occurred.

The recent strength in the US Dollar, while creating near-term pressure on gold prices, appears unsustainable from a technical perspective. Without sufficient fundamental support for a sustained Dollar rally, we expect this strength to prove temporary, removing a key headwind for gold. Therefore, we think gold is positioned to move toward $5,400 with risk managed by a stop below $4,900.

Company Overview

Micron Technology represents a compelling opportunity in the memory chip space as the company reports second quarter fiscal 2026 earnings on Wednesday, March 18th after market close. Consensus expectations call for earnings of $8.69 per share on revenue of $19.15 billion, representing the high end of management's previously provided guidance range.

Last quarter, Micron provided earnings guidance of $8.22 to $8.62 per share on revenue of $18.30 billion to $19.10 billion. The consensus estimate has moved above that range, which means it isn't a question of whether the company will beat expectations, but rather by how much. The story centers on AI driving demand for memory beyond available capacity, which is lifting memory prices substantially.

Growth Catalysts and Market Opportunity

As we have often observed, Micron is fundamentally a commodity business. The stock trades with memory prices, which in turn determine the company's earnings. According to industry research, Micron's guidance was based on 30% sequential increases in memory pricing, but recent checks indicate DRAM has increased by 80% to 100% quarter over quarter, while NAND has increased by 60%.

This gives the company's guidance significant upside potential. Current whisper expectations are calling for earnings of $9.70 per share, well above the consensus estimate. Supply remains extremely tight, with the company reportedly able to meet only 50% to 66% of customer demand, which suggests pricing power will persist.

Current consensus estimates for the May quarter assume prices increase another 25%, but with supply constraints remaining severe, we think actual price increases could range from 50% to 100%. While the company is unlikely to guide to the upper end of this range, there is substantial room for upside to the consensus estimate of $10.57 per share for the following quarter.

Technical Setup and Entry Strategy

There aren't many stocks with favorable price action, positive sentiment, and strong quarterly tracking right now, but Micron is an exception. The stock completed an outside reversal at a key technical level, suggesting accumulation by informed buyers.

When Micron beat the consensus estimate in the past, the stock closed lower by an average of 0.80%, and results were similar when beating higher whisper expectations. The key has been the company's forward guidance, because by the time earnings are reported, everyone already knows what memory prices have done.

The company has never provided positive guidance while also missing the consensus estimate. When the company has given positive guidance, the stock gapped higher 76% of the time and was higher by an average of 5.0%. Given the extraordinary strength in memory pricing and ongoing supply constraints, we expect strong guidance that could drive the stock significantly higher.

We think Micron represents an attractive opportunity to gain exposure to the ongoing AI infrastructure buildout through the memory supply chain. Consider establishing positions in the $200 to $210 range, targeting a move toward $240 with risk managed by a stop below $190.

Company Overview

FedEx reports third quarter fiscal 2026 earnings on Thursday, March 19th after market close. During the company's Investor Day in mid-February, management indicated it expected to beat the consensus earnings estimate at the time of $3.99 per share. The consensus estimate has now been revised higher to $4.14 per share, with current expectations calling for $4.24 per share.

The company didn't just give expectations for the third quarter, but also outlined its strategic plans through 2029, which has pushed earnings estimates higher as the company expands margins. FedEx is spinning off FedEx Freight in June, which helps the company focus on its primary operations with stronger execution potential.

Risk Factors

This positive momentum has helped sentiment reach its highest level in years, but this also creates downside risks. When investors have been this bullish in FedEx historically, it has actually been a headwind for the stock. At similar levels of optimism, the stock was lower three months later 52% of the time, declining by an average of 0.6%.

There is also the matter of a war driving up oil prices. When the company reports results and updates guidance, that guidance will be based on current fuel costs. This is obviously a significant concern for a transportation company. We believe this puts downside risks to the company's guidance for the fourth quarter.

While the company's long-term restructuring plan appears sound, the near-term setup combines elevated sentiment with rising fuel costs at exactly the wrong time. We think a more cautious approach is warranted, potentially waiting for post-earnings clarity before establishing positions.

We are modestly net long the overall stock market. Our positioning reflects a belief that the current selloff represents a potentially attractive entry point rather than the beginning of a sustained bear market. However, we remain cognizant that there are also signs suggesting the market may have put in a cycle top.

Within our equity holdings, we have a long position in Micron Technology. This position reflects our conviction that memory pricing dynamics remain extraordinarily favorable and that AI infrastructure demand continues to exceed available supply. The recent surge in memory prices from 80% to 100% for DRAM validates this thesis.

We also hold a small long position in Red Cat Holdings as a speculative growth allocation. This represents exposure to the domestic drone manufacturing trend and defense procurement shifts away from Chinese suppliers. The position is sized appropriately for its speculative nature and higher volatility profile.

The strongest argument for a move to new highs from current levels is the continued inflow of capital into markets even as prices have fallen and breadth has deteriorated. This doesn't guarantee money will continue coming in, but it represents underlying strength. Should the S&P 500 get back above 6,795, it would mark a reversal of recent selling and likely confirm a move to new highs.

We have turned back to a more neutral stance ahead of key earnings releases this week, which mainly means covering some short positions and adding selective long exposure. All selloffs coming off highs should initially be bought, and it is only once the subsequent bounce fails that a bear market truly begins.

That said, there are also plenty of technical and sentiment indicators suggesting caution is warranted. Market breadth continues to weaken, and while oversold conditions typically lead to bounces, those bounces can fail. We remain flexible and prepared to adjust positioning as new information becomes available.

For the S&P 500, we think the index can move toward 7,100 from current levels, but we manage risk with a stop below 6,500. The recent pullback to 6,600 support created what we believe is a favorable entry point, with key technical support levels holding and momentum indicators resetting to healthier levels.

In commodities, we expect WTI crude oil to move toward $87 with risk managed by a stop above $105. The fundamental backdrop for energy remains challenged by government intervention to cap prices, Iran's willingness to allow partial tanker passage, and technical resistance. For natural gas, we think prices can reach $2.90 with a stop above $3.40 managing risk.

Conversely, we believe gold is positioned to move toward $5,400 with risk managed by a stop below $4,900. We view the recent technical correction as a healthy reset that improves the sustainability of the precious metals uptrend. The combination of dollar overbought conditions, rising inflation expectations, and geopolitical uncertainty creates a compelling setup for renewed gains.

Overall, our positioning reflects confidence that the equity market can bounce from oversold conditions, supported by extreme bearish sentiment that historically precedes reversals. However, we remain vigilant for signs that this bounce may fail, which would signal a more serious market downturn. We continue to view geopolitical headlines as noise and temporary disruptions rather than fundamental threats to the underlying economic expansion, provided the Iran situation resolves within a reasonable timeframe.

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