Weekly Report

We still expect choppy to down into the end of May or so and we will deploy the rest of our cash. The dollar is NOT weakening, and in fact is quite strong on an intermediate to long-term basis.

Stocks fell on Friday and although the decline was not severe in terms of percentages, the behavior of the fixed income markets has caused some fear in the press. We continue to look for some pullback into the end of May.

Here are some key numbers to determine if a pullback has started: QQQ below 687, and SPY below 727 would be strong indications. Above 104 on WTI would imply a test of the 115-area. On BRENT above 108 would imply a new high.

We believe that the markets are suggesting the economy is strong and looking past the Iran Imbroglio. Right now, trading support on WTIC is 89 or so, and on BRENT is 96 or so. Trading resistance on WTIC is 108 (lower than the 120 high), while on BRENT it is 115, the high for this move. A drop here in $GASO could fuel the strong second half we have been looking for.

Please add some small cap positions with a six-month time horizon. We would start to add MUB and LQD into fixed income models or add to them if you have them already.

April had the worst put call readings in many, many years and this should have a greater effect on prices than improving intermediate sentiment. IJR is making new highs while MDY is stalling. The bottom line for us is that we would still use strength to sell oil price sensitive stocks, slowly, to move to an underweight in this area.

Transportations did well despite the rise in oil, yet another sign of economic strength. TLT probed the downside but traded up at the end of the day, a plus. We would be selling oil stocks (except oil services) slowly into strength, trying to get to an underweight by the end of June/July.

Traders should use strength at the end of the week to take some profits. We still are forecasting a drop in rates in the second part of 2026.

More advance on oil would suggest a test of the recent high – be careful of this. We would move some money from XLE to OIH, as that should have better potential long-term.

We would use pullbacks in here to add to position, realizing that a secondary low or retest is possible, but that not all stocks will pull back. On SPY, a close below 690 would be a concern, and on QQQ 620.