The Daily Breakdown looks at the dip in the S&P 500 as volatility expands and as geopolitics heat up in the Middle East.
Monday’s TLDR
- Volatility jumps as stocks and crypto dip.
- Palantir is resting, but can it wake up?
- Apple iPhone shipments tumble.
What’s happening?
One thing is certain: Volatility is picking up.
From my perspective on Friday, the S&P 500 ended last week at a one-month low, while the VIX — also known as Wall Street’s “fear gauge” — ended with its highest weekly close since Q4.
Then of course we have the escalating conflict in the Middle East. There’s an abundance of coverage on the conflict, so I’ll avoid adding any here.
I will say though, I’m not the type of investor who roots for geopolitical turmoil so certain assets — like gold or oil — might rise and longs make a profit. I’m also not the type of person who roots for a recession so we can buy stocks on the cheap and churn out a nice gain once the dust settles.
This turmoil — whether it’s a war or a recession — impacts people’s lives. It tears apart families and homes, and profiting off that just feels dirty.
It’s worth remembering things like this, although I’ll digress…
This week starts with retail sales out this morning at 8:30 a.m. ET and ends with the April monthly options expiration on Friday. The former will allow investors to take the pulse of consumers. The latter has the potential to move markets as large options positions roll, expire, and exercise.
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The setup — PLTR
Below is a weekly chart of Palantir, which has been spending plenty of time consolidating after its earnings-fueled spike in early February.
Notice how earlier this month, Palantir stock pulled back to the prior Q4 high near $21.75 and held this level as support. Even as volatility picked up last week, Palantir maintained a pretty tight trading range — and notably, it didn’t break the prior week’s low near $21.75.
Does that mean that PLTR is ready to run? Not necessarily.
I could see a scenario where Palantir trades down toward $20, where it finds a notable level of prior resistance, as well as the 50-day moving average.
However, I’m going to keep an eye on last week’s high near $23.20. If Palantir can clear that level and start to gain steam, it’s possible we see another run to the upside. Shares have traded really well this year and consolidation could help fuel the next move higher. But it could take time.
For options traders, calls or bull call spreads could be one way to speculate on a move higher — whether that comes this week or after some more consolidation.
In this scenario, buyers of calls or call spreads limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a rally. For Palantir, I would make sure I have enough time on the position by choosing a later expiration date.
Conversely, investors who expect downside could speculate with puts or put spreads.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
AAPL — Apple’s iPhone shipments declined by roughly 9.6% in Q1 to 50.1 million units, according to IDC — below consensus estimates of 51.7 million. The drop comes amid a broad recovery in the smartphone industry and highlights weak sales in China.
GS — Goldman Sachs stocks ended the week on a sour note, selling off as other big banks began reporting earnings. However, shares are trying to rally this morning after the company delivered an earnings and revenue beat on Monday morning.
BTC — The upcoming Bitcoin halving event will reduce mining rewards, impacting new Bitcoin production and overall market dynamics. Historical trends suggest a potential increase in Bitcoin value post-halving — which could also affect stocks like Coinbase and Riot Blockchain. Recently though, Iran’s attack on Israel sent Bitcoin tumbling.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.