Earth is Bearish, Space is Bullish
RLT Newsletter 3.25.26
Market sentiment has shifted. The “buy the dip” crowd has officially turned into the “sell the rip” crowd. For the second time this week, we gapped up into the 200-day SMA and rejected at that level. While it looks like the market is trying to form a short-term bottom, there is a lot of overhead resistance and bearish sentiment keeping it down.
As long as we stay below the 200-day SMA, the bears remain in control. Now that we’ve closed below it for the fifth day in a row, the more likely outcome is another push lower after a B wave bounce.
SPY Daily Chart
Bond Market Pressure
The Trump administration is pushing daily for a resolution with the Iran conflict. One major reason could certainly be the bond markets recent behavior. Last Friday, the 10-year yield broke out and pushed into the 4.45% range. The 10-year has been forming a large triangle pattern since 2023. A move toward the upper end of that range lines up with strong horizontal resistance around 4.6%.
That would not be bullish for equities. As the risk-free rate pushes back toward levels last seen in 2023, it tightens financial conditions and pressures valuations. If yields break out from that longer-term triangle structure, it would be a meaningful headwind for risk assets.
10 Year Yield Daily Chart
The Government’s Dilemma
Higher yields create a major problem for the government because they increase borrowing costs and interest expense. There is a strong incentive to avoid a sustained move higher in rates. The challenge is that inflation remains above target. If energy prices continue to rise, that pressure persists. This limits the policy options available without potentially reigniting inflation. If the war persists and the Straight of Hormuz remains disrupted we would likely start to see inflation tick up in the economic data making things even more difficult for the new Fed president.
Another way to view the bond situation is through the iShares 20+ Year Treasury Bond ETF. TLT is trying to bottom after breaking below support around $86. If TLT can rally back toward the 100-day and 200-day SMAs to fill the gap above, that would likely support equities move higher and align with a B wave bounce. On the flip side, if TLT breaks below recent lows, it is a clear red flag suggesting weak demand for long-duration bonds.
TLT Daily Chart
The U.S. Dollar Index (DXY) is the other chart to watch. It hasn’t broken out from its year-long base yet, but a move higher would be bearish for risk assets. A break above $100 would be a notable signal and likely would align with the next leg lower in equities. When the dollar rises, it pulls liquidity out of the system, hitting tech stocks and Bitcoin the hardest.
DXY Daily Chart
SPY Levels and the Road Ahead
Risk is elevated with a fifth consecutive close below the 200-day SMA. The trillion-dollar leaders are still not participating, which I will cover in tomorrow’s newsletter. SPY is holding above support around $650 but remains below resistance near $661. Until that changes, the market is stuck in a sideways to bearish range where rips continue to get sold.
This selloff has been relatively controlled so far, stepping lower rather than breaking down all at once. It still looks like an A wave, with a larger C wave potentially still ahead.
While Earth is Bearish, Space is Bullish
Despite the broader weakness, the space sector is showing real momentum. Several names pushed higher on Wednesday and continued to follow through. Some of the strongest charts in the space, some pun intended, include:
ASTS (AST SpaceMobile)
ASTS looks like it is either in, or has completed, an ending diagonal that would mark the end of a large move higher. However, if that count is correct, it would also suggest this is just the beginning of a much larger bullish trend for the name. I like how it has held the 100-day SMA as if that was its job, and now we are starting to see it base and establish a solid support level. Since it is such a volatile name, a push to new all-time highs is well within reason, especially considering the relative strength it has shown lately. For a short-term trade, the stop would be any close below the 100-day SMA, as that would likely open the door for a larger pullback, at least down toward the 200-day SMA.
ASTS Daily Chart
RKLB (Rocket Lab)
RKLB just pushed into my target zone on Wednesday from a trade I highlighted in the Friday Financial Forecast swing trade video. It held the 100-day SMA and bounced right into its usual resistance level. A close above $75 gives this one a real chance to push to new highs. If it can gap out of this range, that would be even better. That said, it could just as easily continue ranging between $66 and $75 until it gets a true breakout or break down.
RKLB Daily Chart
PL (Planet Labs)
PL might be one of the strongest stocks on the planet right now. It gapped up on earnings and is holding that move with impressive relative strength. At this point, I would not want to see it close below the pivot formed by the prior three-day candles. As long as that level holds, the sky is the limit. If it does break below, it likely fills the earnings gap, but given the strength of this trend, that would still likely be a buyable dip back into the mid-20s near the 100-day SMA.
PL Daily Chart
FLY (Firefly Aerospace Inc)
FLY is not in the same established uptrend as the other three names, quite the opposite. However, it is showing signs of basing. It just closed above two of the largest bullish volume candles on the chart on Wednesday, and it has recently reclaimed the 100-day SMA and all of its moving averages. Monday’s low should hold, and as long as it does, this one has room to run as it attempts to form a double bottom on the weekly chart. A close above $34 would confirm that pattern, which is roughly 25% higher than Wednesday’s close.
FLY Daily Chart
Miss you man! Love the content here on sub stack! Absolutely gold