Wall Street is set to open higher on this Wednesday morning, but this does come after massive volatility this week.
Now the conflict in the Middle East could turn into a long-lasting drawn out war.
But while Trump celebrated cheaper gas prices at last week's State of the Union, oil prices have undoubtedly surged since the conflict broke out over this weekend, and this has made the national gas price average break above $3 a gallon and could potentially impact inflation.
Data here in the US meanwhile that funds features still pointed to rate cuts for 2026 and joining me to weigh in on all this market action is Mark Newton managing director and head of technical strategy at Fundstra Global Advisors.
Mark, good morning.
Thank you so much for joining me.
Thank you.
Well it marks day 5 of the conflict in the Middle East.
So given all the cross asset volatility we have seen, what do you make of the price action this morning.
Well, I tend to be skeptical that we're going to have rallies of any longitude just yet.
I mean we see Iran attempting to reach out to potentially carve out some type of secret deal to end the war, but it's right to do that with skepticism until we get more details.
We know historically when they said negotiations were going well and that really was not to be trusted.
So the bottom line is I think they certainly want to end the war.
We know the administration also wants to end the war, which makes me Really skeptical that the war lasts and it turns into this long lasting war.
We know that the administration cannot have crude oil at $80 a barrel heading into driving season in the summer.
We want to get gasoline prices down as low as possible.
That can also be quite inflationary when we see crude escalated at prices like we're seeing.
So I think that we probably will attempt to carve out something in the weeks to come.
I'm just skeptical that We're at the lows right away.
To your point, we've seen a lot of process volatility.
There's no immediate evidence that not only crude has peaked out just yet, nor interest rates have stopped going up.
We see a lot of bifurcation within technology, and now we're seeing semis and memory stocks start to roll over.
And sort of play catch up to some of the movies and software, so it's always a problem if technology is not doing well and financials, that's 40% of the market.
However, it is encouraging to see materials, energy, industrials, other parts of the market have been a lot more resilient.
That gives me a bigger hope that we're probably still positive.
This has been literally the tightest range we've seen in over 45 years.
The market feels extraordinarily volatile on an individual security basis, huge losses in many stocks, but the overall indices have been in a 3% range.
About 4.5 months there's been no movement in the S&P or QQQ.
It's been largely sideways, so it feels a lot worse than it is.
Technically.
I do suspect that yesterday was a minor negative to see breadth huge to the downside.
We attempted to break below that key support.
We did hold and try to snap back, but You know, my thinking is we're probably in for 3 to 5 days of volatility and then it probably is right to buy the dip into this very seasonally bullish time in March.
Yes, and while I have you here, I do want to zoom in on energy because as you mentioned, the energy sector has outperformed all other sectors in 2026 on the S&P 500.
And in addition to that, we did see that surge in Brent oil as WTI.
This week and right now we are seeing a slight reprieve, but we do not have a crystal ball and we don't know how long this conflict will continue in the Middle East.
So what do you make of what we're seeing in energy versus energy stocks?
Yes, that's a great question.
And for that crystal ball it's important for investors to utilize technical analysis as we know that's very helpful.
I can get it closer.
Energy stocks have started to lag in the last couple of days.
That's been fascinating. similar to the precious metals, when the stocks themselves start to diverge while the price of the commodity is moving, normally that can send a warning sign that we're close to at least a possible temporary peak in price.
We know Exxon is actually lower than the time right before the strike, which was remarkable.
Crude has been up 10 to 15%, but ExxonMobil has actually been down.
So my thinking is that.
Energy is not going to be able to sustain its current momentum versus the broader market.
It's leading all other sectors by 700 basis points at a minimum year to date.
It probably does face some consolidation sometime in March, April, but I think look, commodities are certainly showing evidence of working very well this year.
We started with precious metals, now we have crude.
I think the grains are actually a pretty Interesting area for 2026 and I think they will probably start to show really good strength.
So it's right to be diversified.
It's right to be in commodities and emerging markets, not just huge investments in technology which many are accustomed to.
That's been the wrong trade at least just kick off the year.
So diversification is the key. and we did have that chart of ExxonMobil up in addition to WTI and that's been interesting in terms of price action, especially given all of the geopolitical events we've seen so far in January.
But as you mentioned, I do want to get to your take on AI disruption because that has been moving the market and affecting software names and it's hard to believe that it's.
It's been about a week since Nvidia earnings came out.
So where do we go forward from here?
Well, my thinking is software is right to position in.
The move has been far too extreme to the downside.
Software ETFs like IGV have been stabilizing their support near former April Lowe's.
We saw one of the biggest pushes in volume in IGV of all time.
Even yesterday we saw a very good outperformance in IGB even when technology was sort of faltering early.
I think we probably will eventually see this carry over to semis and see semiconductor issues start to weaken.
It's interesting because Nvidia really blew out earnings and the stock really underwhelmed with regards to how the stock price performed.
So I'm not as big of a fan of investing in semiconductors at these levels.
I know it's an amazing.
Area for the long term, but my thinking is 2026 should be a year of consolidation, and it started with software.
I think it probably leads to memory and you know it's just right to be diversified and not really have too many concentrated vets, I think in tech.
And speaking of outperformance as we headed into 2026, there's focus on markets outside of the US, especially given the Double digit gains we've seen for the Dow, Nasdaq and S&P 500 for three years straight.
But given the activity we've seen this week so far in terms of global markets, where do you stand in terms of your base case and your market outlook for the S&P 500?
Well, that's unchanged.
I think we're going to get to 7300, which is not too far above current levels, and it's going to be a choppy year.
My own thinking is that we probably do see further weakness into April before a bounce into the summer time, and I think we probably have a third quarter drawdown into October, November and then a very strong rally that carries us.
The end of the year and probably into quite a bit through 2027, so choppy year but right to keep dry powder and be much more of a trader I think than an investor this year.
There's going to be a lot of opportunity, but you have to really be ready for it when we see that volatility.
And speaking of volatility, I do want to ask you about what we've been seeing in crypto.
So Bitcoin as well as the rallying today, at least for the past 24 hours.
Bitcoin back above that 71,000 level and reclaiming 2000.
But we have to keep in mind that year to date we are off double digit percentages and well off those highs seen at the end of last year.
So what is your thinking on where we go?
I think we remain in a crypto winner, but I do see evidence of some definite stabilization since the beginning of February.
I think crypto right now is in a short-term, bullish 80 day cycle that likely carries us up into the middle part to the latter part of March.
I do think we can bounce in all crypto, but I do suspect it proves short-lived and we pull back into.
That could mark a more sustainable low.
The fear of cryptocurrencies is off the charts.
It's much worse than equities.
So normally that's a good guide along with just knowing that the average decline in these four year cycles is about 80%.
We've already seen 50%.
If you have a buy and hold approach, then it probably makes a lot of sense to buy and hold for the next couple of years.
If you're short term, you have a month or two.
I think we get a bounce, and I think it's probably going to be still pretty choppy in April, May, and that's really the time you really want to look to buy dips and hold, I think, between then and year end.
Well, Mark, we will have to leave it there for today, but as always, great talking to you.
Thank you so much for joining us.
