Friday 27 March

Good Morning,

The S&P closed lower by 115 points yesterday closing below all the key moving averages and in negative gamma. Pre market the Dax is down another 2% but somewhat curiously the S&P is flat for now. The Bind volatility index ($MOVE) closed up 18% and spot WTI is trading at $94.5.

The gran plan of the US here as we discussed some months ago is to control the energy corridors, whoever controls those control the monetary system. AI is going to need a vast, uninterrupted energy supply. Controlling Iranian and Venezuelan oil and choking China gives Trump more leverage in the upcoming talks in May. Temporary pain for long term gain is the plan.

During a press conference yesterday President Trump stated that ‘‘he thought the market would be lower and oil higher’’ - that didn’t inspire me with confidence as his tolerance level appears to be lower. The play was a full de-escalation of the conflict but that probability appears to be waning.

We have a path here short term back to around 6750-6800 but ultimately that is likely to fail if we get there. Any close today under 6470 and I’ll cut the swing calls excluding longer term ones (September and beyond). We can add lower at major supports as time goes by. Despite the current gloom I believe huge opportunities await us as long as we remain patient.

The computer has modelled this scenario on the chart below, implying that the weekly close today is extremely important which makes sense near our critical 6500 pivot level. The bear case here implies another fairly sharp decline to 6150 and perhaps 5500. A full 1 standard deviation move lower this year is 5650. At 6150 I will add a further 20% of my LT portfolio back into SPX and SMH and another 50% of my LT portfolio back at 5600/5650.

The double bottom case is strong because:

Two separate tests of the same level, October 2025 and now, with a meaningful rally in between is the textbook definition of a double bottom. The 6,500 area has now been tested twice and held both times.

The neckline is clean. The high between the two bottoms — wherever the bounce peaked, call it ~6,800 — is the level that, if broken to the upside on volume, would confirm the pattern and project a measured move back toward 7,500+.

The Problem:

Everything we look at argues against confirmation. Low RelVol means there’s no conviction buying at the level. VXV/VIX inverted means near term fear is elevated, not the calm accumulation you want at a genuine double bottom. And the close below the pivot today means sellers are still in control.

A genuine double bottom looks like:

Second test on lower volume than the first, followed by a sharp reversal on heavy volume. What you want to see is the market touch 6,500 or 6470, get quiet, then explode higher on a volume surge. That’s institutions buying, not hedging.

What we’re seeing instead:

A second test of 6,500 on drifting, below average volume with options market stress is the market leaning on the level, not bouncing off it.

The level is the same. The question is entirely about what happens at it. Right now the evidence slightly favours the bear case — but 6,500 (on a closing basis) holding into next week on improving volume would flip that immediately.

SPX Implied Range