📈 The Bounce Nobody Trusts
After Friday's bloodbath — Dow crashing 793 points into official correction territory, Nasdaq bleeding 2.15%, oil kissing $100 — markets are doing what they always do on the Monday after a panic: bouncing. Dow +0.9%, S&P +0.5%, Nasdaq +0.3% in early trading.
But look at the composition. The Dow is leading because energy and value are catching bids. The Nasdaq is barely green. Semiconductors are lagging. Russell 2000 is actually down 0.6%. This isn't a broad-based "we figured it out" rally — it's a rotation trade with a side of short covering. The stuff that got destroyed the most (mega-cap tech) is bouncing the least, and small caps are already rolling over.
Treasuries are catching a bid across the curve, which is giving equities a little breathing room. But let's be real: this is a shortened week with Good Friday closing markets early, jobs data on the horizon, and a war that didn't take the weekend off. This bounce has all the hallmarks of positioning, not conviction.
📊 The Score: Flatlined at Neutral Since Friday's Failed Breakout
Remember Friday morning's Constructive push? The score hit 5.26 at 10:32 AM ET — the first time above 5.25 since before the war escalated. I wrote about it. It felt like the model was detecting a floor. Then the market puked into the close, and by 11:23 AM ET the score was back at 5.23. By Friday evening: 5.22.
Since then? Nothing. The score has been ping-ponging between 5.22 and 5.24 for three straight days. Saturday: 5.22 → 5.23 → 5.24 → 5.22. Sunday: 5.23. This morning at 9:12 AM ET: 5.23. Neutral — 30% QQQ / 70% Cash.
That Constructive test on Friday was a swing trade that lasted 51 minutes before getting stopped out. The model tried to add risk, got slapped by a 2% Nasdaq selloff, and retreated to its cash position. Now it's sitting with 70% in cash watching this Monday bounce from the sidelines. The score is not impressed.
QQQ closed Friday at $562.58 and opened today around $564.11. The 70-day EMA sits at $605.22 — a gap of $41.11. That gap has been widening all month. No EMA override. We follow the score: mostly cash.
🛢️ Trump Wants Iran's Oil "Indefinitely" — Markets Are Listening
Over the weekend, Trump told the Financial Times his preference would be for the U.S. to "control the oil industry in Iran indefinitely." That's not a diplomatic negotiating position. That's an occupation statement. And the market heard it loud and clear — energy stocks are leading today's rally while everything else limps along.
The macro backdrop hasn't improved one bit since Friday. Oil is still elevated. The Strait of Hormuz situation is still a chokepoint. Goldman Sachs dropped a report saying the war is costing 10,000 U.S. jobs per month. The last jobs report showed the economy lost 92,000 jobs with unemployment rising to 4.4%. The Fed is stuck at 3.5-3.75% because inflation — which Powell admitted is running a full point above target thanks to tariffs — won't let them cut.
CNN ran a headline over the weekend: "America's frozen jobs market could stay on ice due to Iran war." The OECD jacked their U.S. inflation forecast to 4.2% for the year, up 1.2 points from pre-war estimates. And remember Macquarie's $200 oil call if the strait stays closed through June? That's not getting less likely.
🎯 My Take: This Is a Dead Cat Bounce Until Proven Otherwise
I want to be wrong about this. I really do. A genuine reversal after five straight weeks of losses would be a welcome change. But nothing about today's action says "we've bottomed."
A real bottom needs one of two things: either the macro improves (ceasefire, strait reopens, oil collapses, Fed signals cuts) or price gets so devastatingly cheap that the score pushes through Constructive and holds there. Friday's 51-minute Constructive test was the model sniffing for a floor and not finding it. Until we get a push above 5.25 that sticks — not for an hour, but for a day or more — the score is telling you the floor isn't here yet.
Here's what I think is actually happening: the market is bouncing because it's oversold on a short-term basis and it's a Monday. Shorts are covering. Algos are buying the 3-day mean reversion. But the fundamental picture — $100 oil, a frozen jobs market, a Fed that can't cut, and an open-ended military operation — none of that changed over the weekend. If anything, Trump's "indefinitely" comment made it worse.
The score at 5.23 is saying exactly what I'd say: interesting bounce, but I'm not deploying capital into it. Sit in cash, watch the jobs data later this week, and see if this rally has any follow-through by Wednesday. If the score starts climbing toward Constructive again with better price action backing it, that's your signal. A single green Monday after five weeks of red isn't it.
⚠️ Bottom Line: Cash Is Still King This Week
Shortened week. Jobs data coming. War escalating. Oil at triple digits. The score is holding Neutral at 5.23 with 70% cash — and after Friday's failed Constructive push, it's not in a hurry to try again. The model got burned testing the waters Friday morning. Now it's content to watch from the shore.
If this bounce dies by Wednesday, it was exactly what it looked like — a dead cat with a pulse. If the score breaks through 5.25 and holds? Then we talk. Until then, 70% cash in a market this chaotic isn't conservative. It's smart.