The market is about to break out one way or the other — here’s how to play it

The triple-digit swings might make it feel otherwise, but the stock market, despite its spiking volatility has been mired in a trading range. Nothing like it was during the historic doldrums last year, of course, but rangebound nonetheless.

In fact, we’re pretty much right where we started the year.

What will it take to change that? A stellar earnings season and some of that tasty fiscal stimulus haven’t been enough for a break to higher highs. And all the unsettling news — geopolitical tensions, rising commodity prices, tariff talk, whipsaw corrections — haven’t been enough to keep the S&P  firmly in the red, either. The struggle is real.

A steady assault on new highs, he says, would likely be realized if the Federal Reserve backs away from its rate hikes and Team Trump lays off the protectionism. Buybacks may also provide a tailwind for stocks, as could a refreshed appetite for the tech high-flyers amid surging earnings and tax cuts.

Hartnett, however, says the bearish case is more likely, and that could be triggered by weaker GDP, slowing Chinese export growth and more geopolitical flare-ups. Toss in credit contagion and “policy impotence” and a break lower would be unavoidable.

In our call of the day, here are some of the moves he suggest investors consider to protect themselves in the face of such a selloff:

Long T-Bills ... as the Fed now sole hawkish central bank.

Long China stocks  … on China policy easing & credibility.

Long U.S. Dollar  …on stealth easing by global central banks.

Short EM local currency-denominated debt … on peak positioning & reducing EM FX exposure, a traditional vehicle to reduce portfolio beta.

Short FAANG … tricky as tech bubble risk remains high, but crowded & 2018 consensus too strongly believes weaker global EPS will not hurt FAANG.

Short High Yield bonds … we think the best hedge against policy impotence.

It’s still early, but that bearish scenario isn’t exactly unfolding today...

The market

Futures on the Dow  , S&P  and Nasdaq  are all nudging higher premarket, as are both gold  and crude , which topped $70 a barrel — the first time since 2014. Asia  markets closed with gains for the most part, while Europe  , on a bank holiday in the U.K., was holding mostly steady.

Read Market Snapshot for more

The chart

Stocks have been volatile of late, but the steady decline that many had predicted would befall the market once quantitate tightening began hasn’t really taken hold, as you can see by this chart from Callum Thomas of the Topdown Charts blog:

But how long will investors hang on?

“If you thought quantitative easing was a tailwind for stocks on the way up it stands to reason that it will be a headwind on the way down,” Thomas wrote. “So this will be one to watch and a risk to be mindful of.”

The buzz

Prepare for a buffet of all things Buffett today after the festivities in Omaha will give way to the Berkshire Hathway  CEO’s appearances on the media circuit on Monday. Over the weekend, Buffett gave investors plenty to chew on as he touched on everything from Microsoft  to bitcoin  to Apple  and more.

With 81% of companies having reported earnings already, the season is winding down. Among the S&P 500 companies, 47 will report earnings next week, including Nvidia  ,  and Walt Disney Co.  

Deal news is trotting out this morning. Starbucks   is getting a lift after Nestle said it will market the coffee maker’s products globally and get $7.15 billion as part of the agreement.

International Flavors & Fragrances  says it will buy Israel-based Frutarom  in a $7.1 billion deal, and that’s taking a toll on IFF shares this morning.

Gramercy Property  is soaring after news Blackstone will buy it in a cash deal worth $7.6 billion.

Keep an eye on Hawaii’s Kilauea volcano after it spent the weekend erupting and causing the evacuation of thousands of people. As of Sunday, dozens of homes have been destroyed. Check out some of the footage:

The quote

“I’m going to build a moat & fill it w candy. Warren B will not be able to resist investing! Berkshire Hathaway kryptonite... I’m super super serious” — Elon Musk, trolling Warren Buffett on Twitter over the weekend.

Meanwhile, the Onion is reporting on another of Musk’s visions:

The economy

Not much on the schedule this week in terms of economic data, though we will get a look at the Consumer Price Index on Thursday. As for today, the Federal Reserve will release the consumer credit figure at 3 p.m. Eastern, with the consensus calling for an increase of $16 billion in March.

A few Fed speakers are on tap today, including Chicago Federal Reserve Bank President Charles Evans and Dallas Fed President Robert Kaplan. Fed Chairman Jerome Powell will be speaking at a panel discussion in Zurich, Switzerland.

The stat

Getty Images

$1.2 billion — That’s the record-breaking total haul for Walt Disney’s “Avengers: Infinity War.” The film just became the first ever to top $1 billion in 11 days. And it still hasn’t even opened in China.

Random reads

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Secretary secretly saves millions, gives millions to charity.

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Donald Glover made quite the splash on Saturday Night Live.

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