Fallout From The Fury
Tight Range Consolidation Breaks Down, Opening The Door For More Than A Dip
The Bottom Line
Buyers are seemingly losing their grip in this tug-of-war for control.
Faced with a constant flow of new headwinds and unexpected risks, the series of lower highs and lower lows from the January 28th high continued last week.
Let’s review. Upward momentum is gone. Uptrend lines are broken. The S&P 500 has fallen in four of the last five weeks. And, now, the first primary support level, too.
Faced with a barrage of new and unexpected risks, last week price broke and closed below triple range support at the 100 day moving average. Until last week, tight range consolidation mostly through time, internal rotations, and internal corrections was considered bullish until proven otherwise.
However, price is starting to prove otherwise.
The Bull Trap Resets
This year’s breakout above the October high is currently bull trapped.
The bearish reversal formed through the tight consolidation over the past 12 weeks has been triggered targeting a move down to S&P 6548 (-2.85% from last week’s close).
Price has dropped and closed below triple range support at the 100 day moving average.
Secondary support is being tested at the 150 day moving average and December low at S&P 6720. If these should break, the 200 day moving average will be in play rising just above the November low as shared below:
To be clear, a break below these supports doesn’t mean the bull market is toast.
The graveyard of failed investors is already filled with premature top callers. I don’t plan to be the next one buried there. But it does mean we have to be prepared for more weakness until the price action shows real improvement.
You may recall a month ago I laid out the line in the sand:
“Unless and until the January, December, and November lows are broken with sustained downside momentum, recent volatility is more likely consolidation than major top.” (February 8, 2026)
I stand by that statement exactly one month later.
The January low has now been broken.
The December low was tested twice last week (Tuesday and Friday) and was defended and held both times. That matters.
But, the first line of tight range support is broken and that matters, too.
Buy The Dip?
The S&P 500 is currently down -3.75% from its January 28th high.
To put this in perspective: a -3% decline is not even a routine -5% pullback that happens three to four times every year.
The reversal that has triggered, if successful, would be a -6.5% decline from the high.
That’s not a bear market. That’s a mildly corrective pullback.
So far, this is only a dip. A minor setback. But it is a start, and starts have a way of becoming something more if they are not soon trapped.
As we’ve reviewed in prior reports, there is a strong tendency for the S&P 500 to test the 200 day moving average in midterm years.
Geopolitical Research
According to Peter Oppenheimer, the Chief Global Equity Strategist at Goldman Sachs, most geopolitical shocks produce a median S&P 500 correction of roughly -6% over 18 days to price in the risk and reach the bottom followed by stabilization if the event does not trigger a recession.
This tracks with the bull trap reversal targeting a 6.5% decline from the January high.
I couldn’t share or closely replicate Peter’s research as he analyzed dozens of geopolitical events spanning several decades. His broader study included many minor skirmishes, localized conflicts, and periods of high tension that caused quick 2 to 4% drops resolving in under a week, too.
With Gemini’s assistance, this is the best I could do showing the potential for a -7.6% pullback over 19 days instead. But you get the point. These events tend to trigger buying opportunities rather than market tops.
Everyone should already know this, too.
This could prove to be the exception rather than the rule, but you might as well know what the research suggests is most likely as a base case scenario.
Moreover, Peter Oppenheimer conveyed last week what most on Wall Street think, and this is key: the structural supports for this bull market remain intact. Earnings are still growing, balance sheets are healthy, and monetary policy remains broadly accommodating. The rapidly evolving AI revolution has the potential to significantly increase corporate profits and widen margins unlike any time before it.
This mindset is getting challenged.
The Fog Of War
A week ago, the attack on Iran was already underway.
A surgical hit on Iran’s leadership, shifting power to the Iranian people while giving Trump his revenge against those he believes tried to kill him. Mission accomplished.
Another geopolitical event. Rapid de-escalation. Limited fallout. Stocks break out.
Same playbook as last summer’s strike on Iran’s nuclear facilities. Same as Trump’s attack on Venezuela. Every dip a buying opportunity. Business as usual.
Then markets woke up!
The impacts were larger than expected and showed no signs of fading.
The fog of war made the risks challenging at best to evaluate.
The Iran attack spiraled well beyond a limited strike on its leadership. Iran is hitting back, targeting critical energy infrastructure, and no one can see the endgame.
Oil has spiked to over $100 a barrel this weekend as maritime traffic in the Persian Gulf ground to a halt. Freight rates have surged. Supply chains are being stressed. Inflation fears have been reignited.
Even though the spike in energy will have greater impact on the global economy (especially Europe and China) due to increased domestic oil production, the U.S. will still feel the some pass through effects.
Historically these events have not ended bull markets. But black swans could emerge. For example, news this weekend of Russia helping Iran attack key U.S. defense positions increases risk the attack on Iran could become a much larger event than expected.
Meanwhile, February payrolls came in at a loss of 92,000 jobs against expectations of 60,000 additions. Impacts from the crackdown on immigration and Trump’s economic policies are becoming more evident each month in this second term.
Additionally, there are signs that corporate America is set on using AI to not only help their workers be much more productive, but to potentially serve as their replacements. The only workers considered safe for now are those who can utilize AI effectively to boost the bottom line. You either join the revolution or get rolled by it. The choice is yours to make.
The Fed Put is currently in doubt unless it throws away its playbook. Rate cut expectations are now slipping later. The 10-year Treasury climbed to 4.17%, tightening the screws on equity valuations and corporate borrowing. Not to mention private equity, too.
Then Washington piled on, drafting regulations to restrict global AI chip shipments, rattling a tech sector already in a correction. Also limiting which AI can be used in government, extending the power of Trump over corporate America even more.
Might I also add, redemption pressures are emerging in large private credit funds. No big deal, until it is a big deal.
A week ago this was a buying opportunity. Now nobody’s sure what it is.
The Trump Put
With the one exception of last year’s tariff tumble triggering the last correction, markets have given Trump the full benefit of the doubt. They still give him the benefit of the doubt today.
This is rooted firmly in the belief that when push comes to shove, he will do whatever it takes to keep the stock market trending higher. That is the Trump Put.
He has learned that as long as the stock market does well, he can do whatever the hell he wants and nobody will stop him. From his perch, Americans only care about one thing - their pocketbook. It is one of the reasons why stocks haven’t broken down more.
The collective belief is that he will soon declare victory as he already tipped this hand in this troll-like tweet on Saturday:
To make quick war, then quick peace.
Especially if the stock market shows that it doesn’t like this Iran attack and oil spike to continue, pressuring the U.S. economy.
And, for him to then swiftly move on to the next item on his to-do list. Cuba, Greenland, midterm elections, etc. There’s probably a lot more at this high rate of pace for more items to be crossed off his bucket list before the midterms, but this is what we know.
The market is still expecting the fury to wind down quickly so he can move to the next thing to make everyone and every place great again. Perhaps if it gets bad enough, we will even get Trump tweeting that this is another great time to buy like last year!
That expectation is a pattern. And patterns work until the day they don’t.
Last year, it worked every single time. Dip buyers got paid, repeatedly, for trusting that chaos would always be followed by calm. The so called pain trade is higher than lower. And they’ll keep buying the dip until losses prove the strategy is broken. Right now, it isn’t broken.
But the market, including yours truly, is starting to wonder if this tight range consolidation has created significant overhead resistance than a base camp of support that will remain intact for a lot longer than expected.
Weekly Performance Matrix
So far the market is correcting more through rotation rather than full liquidation.
As we look through last week’s performance matrix, it is easy to see evidence of a pattern in which this year’s strongest performers were under more selling pressure while the weakest performers were relatively strong.
At the top level, this means the mid-cap leadership was under the most pressure last week followed by significant weakness in the smaller caps, too.
Energy was the only place to hide in the major sectors:
Industry groups show there were a few isolated areas of strength, like software:
This year’s worst-performing factor, large cap growth, showed relative strength:
Seeking safety in high dividend, low volatility stocks has continued:
Energy commodities (oil and gas) are literally on fire:
Trump is certainly helping to make Israel great again:
The U.S. Dollar likes war, too:
Crypto sees a rare moment of strength this year:
Microsoft is having a tough 2026 in the Mag7, so of course it posted a gain last week:
Please repeat after me. This environment DOES NOT reward aggressive positioning employing leverage:
Often a better alternative than selling and shorting during risk events, well-timed hedges are starting to pay off:
Even the doomsday trades caught some love last week, though I must repeat, this environment DOES NOT reward aggressive positioning using leverage:
Pro Tip: Look for the rotation into the laggards to continue. Most importantly, if tech stocks start to show significant, sustained improvement (i.e., not only hold above its 200 day and anchored VWAP from last year’s low but rallies from it), it will be incredibly helpful given its outsized effect due to its large index weight.
The Week Ahead
Markets face a volatile week driven by inflation data via the CPI, more signals about the labor market, and the risk of a spike in oil and energy prices impacting the global economy.
Key economic data this week
Wednesday: Consumer Price Index expected around 2.4% year over year
Friday: JOLTS report measuring job openings and labor demand
Friday: Second estimate of fourth quarter U.S. GDP
Tuesday: Existing Home Sales
Thursday: Housing starts and jobless claims
Earnings to watch
Hewlett Packard, Oracle, AeroVironment, Kohl’s, Dick’s Sporting Goods, Dollar General, Ulta, and Adobe will all be reporting.
Seasonality
Weakness in early March has historically been a buying opportunity ahead of the Spring fling starting in the second half of March:
What I’m Watching This Week
Most importantly, I’m watching the price action. :)
That should not surprise you!
#1: Does the secondary support at the December low hold? This is the week’s binary. A clean break below it with sustained follow-through changes the character of this move from tight consolidation and only a -3% dip to something more. Watch for sustained closes below, not just intraday violations.
#2: Does Trump Put get reaffirmed? The market is one tweet away from a +2 to 4% rip your face off rally. The pattern is well-established: first the fury, then fatigue, then the art of the deal. Watch for Trump to claim victory and begin the exit strategy. That’s the pain trade higher catalyst reignited once again.
#3: CPI on Wednesday & Oil prices all week: With crude spiking and the Fed seeming even more handcuffed, a hot CPI print would spoil the Fed put punch bowl. A continued spike in oil prices will do the same.
The Final Word
This week was another reminder that markets can change quickly when geopolitics, macro data, and positioning collide. When uncertainty rises, the most valuable skill is not prediction. It is discipline.
Right now the priority is risk management.
Active investors should resist the urge to buy every dip simply because that strategy worked well most recently. Until short-term trends improve and buyers regain control, the higher probability approach is active patience and defense.
Do not assume a bottom simply because price reaches support. Wait for evidence that buyers are actually returning. That means higher highs and higher lows, expanding participation, and improving momentum. Price action improvement versus deterioration.
Until then, capital preservation matters more than chasing dips and brief rebounds.
Focus on the basics:
• Respect key technical levels
• Use predefined stops and disciplined exits
• Reduce concentration risk
• Increase diversification across sectors and factors
• Maintain cash reserves so you can deploy capital during corrections
• Consider hedging strategies as long as these conditions continue
And remember, protecting capital must always come first.
We are actively investing in a world now increasingly shaped by a single man’s geopolitical decisions that can shift market conditions quickly. That is simply the environment we operate in. The question is not whether we like it. The question is whether our portfolios are prepared for it.
Right now, markets appear to be pricing a best-case scenario, assuming disruptions will be temporary and risks will fade quickly. Maybe that proves correct. Maybe it does not.
Your job is not to predict which outcome wins.
Your job is to manage risk so that if volatility expands, your portfolio can withstand it.
Stay disciplined.
Respect key levels.
Protect capital.
Let price action lead.
And, I will see you again in the notes as we navigate through it together!
C.E. Kirk
Kirk’s Opportunities
Opportunities To Learn, Grow & Prosper