Markets will rally if fears around crude prices abate, says Freedom Capital's Jay Woods
Speakers
Jay Woods — Freedom Capital
— Freedom Capital strategist
Summary
- The S&P 500 is at a critical technical inflection point, trading just below the 100-day moving average of 6,830; a break above suggests a rally, while failure suggests resistance.
- Oil prices are "coiling" and acting as the primary macro pivot; a spike in crude due to Middle East tensions (Strait of Hormuz) is viewed as a tax on consumers and an inflationary pressure that could handcuff the Fed.
- There is a distinct sector rotation strategy underway: taking profits in Energy stocks (which have had a "tremendous run") to redeploy capital into beaten-down Technology and Software names that are showing technical resilience.
- The market is currently characterized as "bending but not breaking," with volatility creating a trader's environment rather than a clear long-term trend investment right now.
Trade Ideas
"Watch that 100 day moving average 6830. We're ten points below that... It's going to be very telling as to if we can actually get above that." The market is in a "coil." The direction of the next major move depends entirely on whether the S&P 500 reclaims the 100-day moving average or rejects it. Until this resolves, the speaker is "not going all in on equities." WATCH. Wait for confirmation above 6,830 before aggressive index buying. A "head fake" breakout that reverses immediately due to geopolitical news.
"Where I want to put money to work right now are those beaten down technology names... Let's follow Broadcom. Let's follow CrowdStrike." Broadcom (AVGO) specifically held a "key reversal" at its 200-day moving average, similar to a setup seen in Nvidia previously. The speaker views these software/semiconductor names as oversold ("beaten down") relative to their fundamentals and technical support levels. LONG. Technical mean reversion play in high-quality tech. Continued sector rotation out of tech if yields rise or if the "Mag-7" fail to hold the market up.
Jay Woods
Chief Global Strategist at Freedom Capital Markets
"Look at something like Target... What a turnaround story... Risk reward Target looks good." While the broader market is uncertain, specific idiosyncratic turnaround stories offer better risk/reward profiles than the indices. The speaker identifies the company's turnaround efforts as a catalyst that has been overlooked ("lost in the shuffle"). LONG. A specific stock-picking play amidst macro volatility. Consumer spending weakness if oil prices act as a tax on disposable income.
Jay Woods
Chief Global Strategist at Freedom Capital Markets
"I take profits in those energy stocks that have had a tremendous run." Despite the bullish setup for oil commodities (war risk), the equity side (energy stocks) has already appreciated significantly. The speaker prefers to lock in gains rather than gamble on the geopolitical outcome, rotating that capital into beaten-down tech. NEUTRAL (TAKE PROFIT). Selling strength to fund other opportunities. A full closure of the Strait of Hormuz could send energy stocks significantly higher, resulting in missed upside.
Jay Woods
Chief Global Strategist at Freedom Capital Markets
"What's getting crushed? SanDisk [Western Digital] and Micron, the two biggest stocks of the year." The speaker contrasts "resilient" software with these hardware/memory names which are currently "getting crushed." By explicitly stating he is putting money into software/AVGO and highlighting these as the weak spots, the inference is to avoid catching the falling knife here. AVOID. Momentum is currently negative compared to other tech sub-sectors. Sudden cyclical upturn in memory pricing could reverse the trend quickly.
