The Truth Called a Lie

RLT Newsletter 3.23.26

The market was set to gap down at the open on Monday morning when Trump dropped a bomb of his own in the form of a Truth that was later called a lie. At 7:00am, he claimed that the US and Iran had been engaged in very productive talks all weekend and that he would be postponing any and all military strikes for the next five days. Yup, you read that right…just in time for the weekend once again.

This was a major de-escalation from the original 48-hour deadline that had been set to expire Monday morning. The market reacted instantly. SPY surged 3.7% in the first 15 minutes and opened above Friday’s candle. But when Iran responded, saying none of that was true, the market gave back a portion of the move after once again rejecting the 200-day SMA. Even so, it still managed to close up over 1% on the day with a huge volume candle. The takeaway is clear: the market is looking for any excuse to push higher right now and is eager to buy or cover on good news.

The key level we’ve been watching remains the 200-day SMA. Monday marked the second consecutive close below it, and if we can’t reclaim that level tomorrow, history suggests that lower prices are likely coming, and sooner rather than later. SPY has now rejected twice at the 200-day SMA. To shift momentum, bulls need to push price back above the average and close convincingly above Monday’s high to show they are back in control. Even then however, the likelihood of a B wave, lower high in many of the key charts we are watching is high. Some big levels have been broken and risk here in is elevated.

SPY Daily Chart

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In a highly news-driven market, where a single social media post can completely change a chart, there is nothing wrong with taking a step back, de-risking a bit, and waiting until you can find a real edge. Overtrading and swinging for home runs during volatile periods often leads to drawdowns that can get large quickly because of how fast things are moving.

Also, when stocks are beaten down and trading below key support levels, it doesn’t mean they can’t be great long-term holdings. It just means you’re buying into a downtrend, and your time horizon needs to be much longer than if you were buying a momentum stock in a strong uptrend. It also means you’ll likely have to sit through some pain and red before things turn, because you’re not going to nail the exact bottom. In these situations, shares are your friend. Options lock you into a timeframe where you have to be right, and that’s a tough game to play in a choppy, volatile market in a downtrend.

Bottoms take time to form. Real reversals are usually sparked by a catalyst and often don’t see true momentum return until a bullish gap or a strong confirmation candle, many times around earnings. If you’re buying 30 DTE options, you’re simply not giving the trade enough time to work.

Take MSFT for example. Do I think we’re nearing a short-term bottom? Yes, I do. But I also said that back on February 5th when we were at nearly the same level we’re at today. In that time, we’ve had nearly two months of options expire. Slowly accumulating shares, on the other hand, avoids that time pressure. When a stock is nearing a major level like its 200-week SMA, 50-month EMA and remains a key player in the AI trade, that approach makes a lot more sense to me.

If MSFT puts in a strong weekly close below the 200-week SMA, I’ll look to protect my position. Otherwise, I’ll continue adding on down days near that level and look to collar the position once the stock finally starts to bounce.

MSFT Weekly Chart

For more market analysis and technical break downs, check out the Tuesday Top Trade video below.