Stock Market Volatility & Choppiness Continues

The Year-End Moves No One’s Watching

Markets don’t wait — and year-end waits even less.

In the final stretch, money rotates, funds window-dress, tax-loss selling meets bottom-fishing, and “Santa Rally” chatter turns into real tape. Most people notice after the move.

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What Moved Markets

The dominant theme was the escalating U.S.-Israel conflict with Iran, which caused sharp volatility, oil spikes, and risk-off flows, with partial recoveries on dip-buying.

• Geopolitical escalation drove primary volatility: U.S. and Israeli strikes on Iran (starting over the weekend, killing Supreme Leader Ayatollah Ali Khamenei and key IRGC leaders) triggered Iranian retaliation (missile strikes on Israel, U.S. bases, and Gulf targets), raising fears of prolonged disruption to global energy supplies via the Strait of Hormuz. Markets priced in short-term risks (e.g., 4-week disruption per Goldman Sachs oil research), but no full closure occurred.

• Oil prices surged sharply: Brent crude jumped 6–9%+ intraday (to ~$77–$78/barrel levels, highest since mid-2024), driven by supply disruption worries and threats to key shipping lanes. U.S. crude rose similarly; energy stocks rallied, while airlines, cruise lines, and travel names sold off on fuel cost fears.

• U.S. equities volatile but closed mixed-to-lower overall:

  • Monday (March 2): Indexes swung wildly — S&P 500 fell as much as 1.2–2.5% early, then rebounded to flat (+0.04% to ~6,881) or slight gains; Nasdaq +0.36–0.4%; Dow -0.1–0.15%. Dip-buying in tech/defense offset broader weakness.

  • Tuesday (March 3): Renewed selling pressure — Dow down ~0.7–0.9% (300–423 points at points); S&P 500 -0.8–1%; Nasdaq -0.7–1.1%. Intraday lows saw Dow -1,200+ points; partial recovery but risk-off tone persisted.

• Bond yields rose on inflation fears: 10-year Treasury yields climbed (to ~4.09–4.10%), reflecting concerns that energy shocks could stoke inflation and delay Fed easing. Dollar strengthened as a safe haven.

• Sector rotation and safe-haven flows: Energy and defense outperformed; gold futures volatile (up then down); Bitcoin dipped from highs. Broader risk assets (tech, consumer discretionary) lagged amid uncertainty.

Equal-Weight S&P 500 ETF - RSP

• RSP was leading since October during rotation from overvalued mega-caps.

• In the special series in January we showed that Magnificent 7 stocks were losing the momentum.

• The five dominant cycles from the RSP’s daily chart indicate that RSP should be reversing to down, soon.

• But will the trend of RSP’s relative strength going to continue?

• Probably not. My cycle analysis of the RSP/SPY Ratio indicates that RSP will start to underperform its cap-weighted counterpart.  

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What’s Next for the Stock Market?

• Geopolitics affect multiple segments of the market.

• Overnight selling in Asia and Europe, and buying in the cash market in the US.

• Who is better informed of what’s behind the corner?. . .

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