Monday Market Pulse

RLT Newsletter 3.29.26

The selling picked up steam again on Friday, with big tech once again leading the way down. META and MSFT are in absolute free fall, while NVDA, GOOGL, and AMZN all broke key technical levels. Unlike MSFT and META, those three — along with much of the broader market — have only been under heavy pressure for about three days. This raises the odds of continued downside this week. I will note that BTC gave us zero directional help this weekend as its about as flat over the weekend as I have ever seen it.

As I’ve been warning for the past two months, ever since the 100-day SMA broke on SPY, the risk of a larger sell-off has been elevated. Historically, when SPY gaps below the 200-day SMA and fails to reclaim it, the subsequent declines tend to be brutal.

I don’t usually focus heavily on the news — price action remains my primary guide. That said, I spent time this weekend reviewing historical conflicts involving oil supply shocks. Let’s just say, the results lean bearish.

There is a real risk that the current Iran conflict escalates or drags on far longer than the Trump administration or the markets would prefer. Unlike the tariff pivots in 2025, Trump cannot simply walk this back. Multiple parties are now involved, all needing to reach agreement. Uncertainty is enormous — and markets hate uncertainty.

Geopolitical Conflicts & Oil Shocks

Looking at geopolitical conflicts broadly, the data is mixed. We often see a sell-off, but it can be mild, with markets returning to highs relatively quickly.

However, when an oil supply shock enters the picture, the outlook turns significantly more bearish. Initial declines frequently reach the 15–20% range, with even deeper drawdowns possible if the disruption fuels sustained inflation or tips the economy toward recession. Oil supply shocks reliably amplify market pain, pushing drops well beyond the typical ~7% baseline for non-oil geopolitical events.

1973: Yom Kippur War + Arab Oil Embargo

The classic example is the 1973 Yom Kippur War and the subsequent Arab Oil Embargo.

The war itself lasted roughly one month. The market didn’t drop sharply during the fighting because investors initially viewed it as short-lived and contained. However, the broader index had already been in a decline earlier in 1973 and was pushing into the 200-day SMA in what resembled a B-wave.

The real damage came after the embargo triggered a massive oil price spike. The controlled selling we saw early in 1973 looks eerily similar to the action we’re experiencing right now. SPX broke the 200-day SMA, retested it twice in the following weeks, then rolled over. Later, it staged a larger B-wave that retested the 200-day SMA once more before the brutal C-wave sell-off unfolded into 1974.

SPX 1973 Yom Kippur War + Arab Oil Embargo

Current Outlook and Key Levels

It is a high-probability that SPY moves lower into the $600–$610 support zone on SPY. We have the prior ATH, a key gap at $600.54 and the 100-week SMA all forming support at that level. The main question is how we get there:

• Do we see a bounce first, retesting the 200-day SMA?

• Or do we drop straight down in a fear-driven waterfall?

If we plunge directly into the $600–$610 area without a meaningful retest of the 200-day, I would expect a 1973-style pattern to play out: a B-wave rally back to retest the 200-day SMA, followed by another leg lower. That next wave lower should take us at least to the May 12, 2025 gap fill around $569 — roughly an 18% drawdown from the all time high. That magnitude lines up closely with historical oil-shock declines.

To gauge which scenario is unfolding, I’ll be watching the Trillion Dollar Titans closely, along with key ETFs like SMH, XLF, and XLE, plus the DXY and TLT.

With so many key supports broken and market structure altered, I’ve shifted firmly into “sell the rip” mode until proven otherwise — or until we reach support levels where the risk/reward improves significantly which at this point is the $600-$610 level on SPY. While I will still buy selective dips, I’m doing so less aggressively than before, with a longer time horizon in mind for any new positions.

SPY Daily Chart

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