MARKET ANALYSIS
Here’s What You Need To Know

• Markets are starting the week in full risk-off posture after the U.S. and Israel struck Iran over the weekend, with futures repricing the probability of a sustained conflict rather than a quick, headline-driven flare-up.

• The immediate transmission mechanism is energy. Crude is spiking sharply because the market is now forced to handicap supply disruption risk, not just in Iran as an OPEC producer, but through the Strait of Hormuz, which is the real choke point that can turn a geopolitical event into a macro event.

• This is why equities are reacting before the cash open. Higher oil is effectively a tax on consumers and corporate margins, and if it persists, it reintroduces inflation pressure at the exact time equities were already dealing with fragile sentiment around AI, software disruption, and valuation compression.

• Gold is reacting exactly how it should in this regime. When uncertainty becomes “duration risk” rather than “headline risk,” capital rotates into assets that benefit from stress, hedging demand, and currency debasement narratives. That does not mean every tick higher is chaseable, but it does mean the market is telling you where safety is currently being priced.

• The key question for this week is not whether we get volatility, because we already have it. The question is whether the oil spike becomes sustained. A 1–3 day shock is manageable. A multi-week disruption is where second-order effects start to matter: inflation expectations, bond yields, Fed path uncertainty, and equity multiple compression.

• This backdrop is also why “buy the dip” is not an automatic play here as the market has been conditioned to fast de-escalation, but the escalation risk has objectively changed. If de-escalation is not clear and oil remains elevated, dip-buying becomes a lower quality setup because the macro input is still worsening.

• Cross-asset tells you what the market fears most right now:

  • Energy and oil-linked equities should remain bid while supply risk is being priced.

  • Airlines and travel are the most mechanically exposed to higher fuel costs and demand uncertainty, so they tend to be the first to get hit.

  • Defense names often catch a bid on escalation risk, but that trade can be choppy and headline-sensitive.

• For us, this is not a tape to trust the first move as the gaps are likely and so are emotional opens but the only signal that matters is how price behaves after the initial shock and, most importantly, where it closes.

• Today’s playbook is to treat the open as information and if markets can absorb the news and reclaim key levels into the close, that’s great. If we see weak bounces that fail quickly while oil stays elevated, that is the market telling you risk-off is not finished.

Nasdaq

54.45%: over 20 EMA | 51.48%: over 50 EMA | 54.45%: over 200 EMA

• The QQQ failed to deliver the upside follow through that Thursday’s red hammer candle suggested might occur. That hammer formed on 170% relative volume and bounced precisely at 604.54, which was the prior resistance of the broadening wedge that flipped to support.

• Friday technically held above that level and consolidated on 120% relative volume, but price failed to reclaim the 10 week moving average and is sitting directly on the 20 week EMA. Weekly relative volume came in at 133%, which shows participation, but not expansion.

• There is significant supply overhead, and when you layer in geopolitical risk from the Iran situation over the weekend, growth is likely to be the most vulnerable segment at the open.

• If QQQ gaps down, watch 594 as first major demand. That is where we held between February 5 and February 17 with a double bottom. If that fails, the broadening wedge targets the 200 day EMA near 584.55, which is roughly 3% lower.

• Breadth in the NASDAQ remains stronger than small and mid caps, with over 50% of stocks above their 20 day and 200 day EMAs. However, that strength is not translating into clean price expansion in the mega caps.

• The QQQE, the equal weighted NASDAQ, had a stronger Friday and reclaimed the 10 week moving average. That tells us strength exists beneath the surface, but it is not concentrated in the largest names like NVIDIA and Apple, which weigh heavily on QQQ.

• From a day trading perspective, volatility offers opportunity. From a trend following perspective, there is nothing clean to engage right now.

S&P 400 Midcap

50.25%: over 20 EMA | 54.02%: over 50 EMA | 65.82%: over 200 EMA

• Mid caps gapped down approximately 1.10% on Friday but held a key demand level that previously acted as supply between January 15 and February 6 and flipped to demand on multiple February tests.

• Price remains above the 20 day moving average, but relative volume has expanded over the last four sessions while price has stalled and drifted lower. That is an early distribution signal.

• We do not expect an immediate breakdown, but a weak open today is likely. The key is not the gap, but how price closes.

• If an early selloff is aggressively bought and closes strong, that is a bullish signal. If weakness persists into the close on expanding volume, that confirms distribution.

Russell 2000

43.25%: over 20 EMA | 46.95%: over 50 EMA | 60.48%: over 200 EMA

• Small caps remain inside a 42 day base building structure. Friday produced a roughly 1.5% gap down and a third consecutive test of the rising 50 day EMA, which aligns with the 10 week moving average.

• The concerning factor is expanding relative volume during this sideways base. Rising volume without price progress suggests supply absorption rather than accumulation.

• The 50 day EMA at 259.32 is the critical level. If that fails, the next support sits near 255.21, which was the February 5 low.

• A break below that zone likely opens the path toward the 20 week EMA, which would imply roughly a 3.18% move lower from Friday’s close.

• Expect volatility at the open. Focus on the close, not the first hour reaction.

FOCUSED STOCK
LLY: Expect Healthcare To Keep Pushing

ADR%: 3.37% | Off 52-week high: -7.1% | Above 52-week low: +69.5%

• Healthcare broke out last week, and Eli Lilly remains one of the strongest names in the sector.

• Lilly entered its stage 2 advance on September 29, 2025, and is currently consolidating within that broader uptrend.

• On Friday, we saw 140% relative volume step in on the lows, confirming demand support inside this base building structure.

• Defensive sectors are currently leading, including healthcare, energy, industrials, and consumer staples. In a geopolitically uncertain environment, those groups are more likely to attract capital than growth.

• Do not chase marginal breakouts. Look for pullbacks toward the 20 week moving average as preferred risk defined entries.