Market Milestones: The Razor's Edge

The past two weeks have felt like the world is unraveling as volatility surges and the markets finally experience real selling. Many high-flying momentum names like PLTR and APP have been slammed back down to earth, shedding 35% to 50% in a matter of days. Yet, despite the chaos, the SPY is only 7% off its all-time highs and resting on its 200-day SMA. The drop feels steeper because that 7% decline happened in just 15 trading days, with barely any relief from the selling.

SPY

The Magnificent 7, which we track closely, has been hit even harder, with many of our favorite stocks down 20% from their highs—TSLA and NVDA even more so. I’ve felt the palpable fear of this market firsthand as bounces never materialize and every level I expect to act as support gets sliced and diced immediately, as if the market were auditioning for a roll as Ghostface with a freshly sharpened blade. Many positions have hit stops or protection zones as tech stocks free fall. But despite the fear—or rather, because of it—the risk-reward setup at this moment is one of the best we’ve seen in months. Fear creates opportunity, and the more I analyze the charts, the clearer this potential opportunity becomes.

MAGS

It’s easy to forget the following principle when panic is in the air, but it remains true and is fundamental to good investing and swing trading: To outperform in the market, you must embrace the opportunities that fear creates, buy into the biggest dips, and aggressively manage your downside risk.

We haven’t seen this level of fear or risk-reward since August 5th. Buying then felt insane—the news was bad, the gaps were brutal, and the market looked like it was in free fall. But with a solid risk mitigation plan in place, the worst-case scenario was already accounted for. Instead of financial ruin, the worst-case was simply losing small if stops or protective puts triggered. But they didn’t. Instead, the market reversed, kicking off a relentless four-month rally that took us to many new highs.

The market is currently standing at a crossroads. Will the bulls regain control over this market or has the economic, and macro picture changed enough that it is finally the bears time to shine? The SPY and QQQ are both at their 200-day SMAs, key levels they haven’t touched since late 2023. The QQQ actually closed below this level on Thursday, breaking through Tuesday’s candle in a way that it really shouldn’t have. This raises the risk in the market and puts some fairly bearish scenarios on the table. However, it also allows for some stellar risk-reward opportunities for those willing and bold enough to grab this knife. For example, if QQQ drops to $484.00—where both the bull market trendline and a strong horizontal support lie—it would be 10% off its all-time highs and offer a 12% move back into new highs with a 3.5% downside risk. Individual big tech names present even better setups, as stocks like AMZN are sitting on key levels that could either trigger a small bounce, a large bounce, or a quick and small stop-out.

QQQ

The Dollar is finally falling back to earth, which should be a positive catalyst for both equities and Bitcoin. Meanwhile, Bitcoin has held up relatively well, at least so far, despite what was a fairly predictable "sell the news" event on Thursday night. For more insights on Bitcoin, key price levels, and the potential impact of the Strategic Bitcoin Reserve on our favorite cryptocurrency, be sure to subscribe to our RLT Newsletter and join the discussion in our Slack channel!

DXY

Once again, this is a pivotal moment for the market as it stands on the razors edge. It’s oversold and looks primed for a bounce—even if only a short-lived one—but at the same time, it's teetering on the edge of triggering larger-scale bearish signals. Either support holds, leading to another grind higher, or we break down, opening the door for a much deeper flush. The key takeaway is that a strong bullish risk-reward setup is in place. By managing risk aggressively, one can position for the next major move, whether it's up or down. Worst case, support fails, which would lead to a small controlled loss. Best case, we see a meaningful bounce, allowing for collars to be put on longs, locking in risk-free trades into April. No matter what, staying sharp, adaptable, and prepared for the inevitable volatility will be key in navigating this unpredictable, news-driven market.