A Major Move Is Brewing
Editor's note: Look at the signs that the markets are giving you...
Conflict in the Middle East shook investors, but now they're starting to shrug it off. Some investing opportunities may look tempting on the surface, but patience is the better strategy.
In today's Masters series, adapted from the February 23 Weekly Market Outlook of Ten Stock Trader, editor Greg Diamond highlights several market setups that could reward patient investors who know what patterns to leverage...
A Major Move Is Brewing
The U.S. stock market has entered a period of uncertainty...
It fell slightly after the bombing of Iran on February 28. But the market's "support" levels are still holding – for now.
Importantly, I see some promising setups forming.
Whatever the catalyst – whether it's turmoil in Iran or something else – I'm not concerned with the why behind market moves. All I care about is how we can capitalize on them.
In this Weekly Market Outlook, we'll review key setups in the Nasdaq Composite Index futures and the U.S. 30-year interest rate. We'll pin down how to prepare for the next big move, no matter the direction.
Let's start by looking at a broad snapshot of the market...
I've drawn three potential scenarios in the Nasdaq using red, black, and blue swing lines.
The red swing line represents the most bearish scenario. In this setup, the Nasdaq topped out in January, made a lower high in mid-February (at the "natural" dates), and fell into March, which sets the stage for a deeper fall.
If the Nasdaq breaks below the two horizontal red lines above, it would signal a major move. This would create a fantastic trading environment.
With the black swing line, we'd get a pop into this week and then a smaller move lower into April.
The blue swing line represents the most bullish scenario. As with the black scenario, the Nasdaq would bounce higher this week. But then it would rally for the next couple months, make a false breakout (briefly rising above the diagonal blue line), and then turn lower.
The black and blue scenarios both involve extreme choppiness... They show a real lack of direction. Remember that the software sector has already topped out, and the financial sector has likely topped out. The Nasdaq could chop sideways for a bit before following these two markets lower.
This sort of outcome would be frustrating but manageable. We could still trade within this choppiness... We'd just have quick turnarounds in order to trade shorter waves. So we'd have to be much more patient.
If the black or blue scenario unfolds, the April/May time frame would become the most important inflection point... It's when I'd expect the Nasdaq to truly break down and usher in extreme volatility. This is when we'd start getting aggressive with our trades.
Now, let's look at the U.S. 30-year interest rate...
As you can see, the 30-year interest rate is bouncing around in a funnel-shaped pattern... It has been narrowing since May 2025. Rates are clearly reaching an inflection point.
Now, the question is whether we'll get a breakout or a breakdown.
To figure that out, I'll be watching the correlation between interest rates and stocks... Will they drop together as part of a growth scare (a period of volatility and sharp sell-offs) or a geopolitical event (e.g., further escalation in the Middle East)? Or will they rise together if inflation worsens?
The short answer is: I'm not sure yet, but I'm keeping a watchful eye on it.
I say this all the time, and it's still true... We need to be patient. Stocks and interest rates could break in either direction.
We don't want to execute bad trades and assume unnecessary risk. It's better to take whatever the market gives us – and act on it strategically – at the right time.
Best,
Greg Diamond, CMT
Editor's note: There's nothing "weird and mystical" about Greg's trading strategy... And it's not "voodoo science." In fact, this strategy has helped him find 41 opportunities for his subscribers to earn 100%-plus gains.
Now, Greg has identified another chance for folks to double their money over and over again in the weeks ahead. Click here for the details.