Trade of The Week - MacroVoices #516

Key Concepts

• Rare Earth Elements (REEs): Critical materials with strategic importance, particularly in magnet production, where China holds a dominant position in midstream processing (separation & magnet production).
• Strategic Supply Chain Trade: Investing based on geopolitical control of key resources rather than simple commodity price movements.
• REMX: The Rare Earth and Strategic Metals ETF, used as a basket approach to gain exposure to the sector.
• Sector Rotation: A shift in investment focus from one industry sector to another, driven by economic conditions or investor sentiment.
• Perceptual Pendulum (Trump): The fluctuating market reaction to news and statements from Donald Trump, creating volatility.
• MAG7: The seven largest US technology stocks (often driving market performance).
• Dixie Index: The US Dollar Index, measuring the dollar's value against a basket of major currencies.
• Measured Move Targets (Gold): A technical analysis technique used to project potential price movements based on previous price swings.
• Collar (Options Strategy): A hedging strategy involving buying protective puts and selling covered calls to limit risk and potentially generate income.
• Bull Call Spread (Options Strategy): An options strategy used to profit from a moderate increase in the price of an underlying asset.
• U308: The chemical formula for uranium dioxide, a common form of uranium used in nuclear fuel.

Equities Market & Trump's Influence

The equity market is currently experiencing a bullish rally following a shift in perception regarding Donald Trump’s policies. Initially, concerns about potential trade wars and geopolitical tensions caused volatility, but Trump’s statements at Davos – indicating no tariffs and a focus on military bases rather than full acquisition of Greenland – triggered a rapid market rebound. This is described as a swing in the “perceptual pendulum,” and the expectation is for this bullish trend to continue until the pendulum swings back. The key question is whether this rally will result in new all-time highs or represent a topping formation, with a determination expected within one to two weeks.

Despite the overall bullish sentiment, the market is showing signs of sector rotation, with financial stocks lagging due to earnings misses, but not yet exhibiting a definitive technical breakdown. The S&P 500 is being accumulated, with widening market breadth and outperformance from small-cap stocks. However, the MAG7 stocks continue to drag on the index, showing lower lows. This suggests the rally is driven by broader market participation rather than solely by the tech giants.

Dollar Index (Dixie) Analysis

The US Dollar Index (Dixie) experienced a brief rally fueled by Trump’s geopolitical moves but has since retraced much of those gains following his announcement regarding European tariffs. The dollar is currently in a consolidation range with no clear directional trend, and future movements will likely be dictated by headlines and geopolitical developments. The euro was the primary driver of the dollar’s recent decline, while the Japanese yen continues to weaken due to stress in the Japanese Government Bond (JGB) market. The 98-99 zone on the dollar index is considered a “fair value zone” with significant trading volume, suggesting a continuation of the current range until a breakout occurs.

Commodity Markets: Oil, Gold, Uranium & Copper

Oil: Oil prices are struggling with resistance at the 200-day moving average ($60.49 for March WTI). A move above $62.50 is needed to confirm a bullish trend. As geopolitical tensions ease, the risk of a pullback towards $59 and then $55 support increases. Despite this, the price action has remained constructive, staying above the 50-day moving average.

Gold: Gold recently reached a fresh all-time high, activating measured move targets up to $5,100. However, a significant unfilled gap exists down at $4,600, representing a potential $250 pullback to fill the gap before further gains. Given the calming geopolitical environment, a pullback is considered likely.

• Options Strategies for Gold: For existing long positions, a “collar” strategy (buying protective puts and selling covered calls) is recommended to lock in gains while allowing for further upside. Alternatively, profit-taking on LEAP positions (long-term equity anticipation securities) and replacing them with bull call spreads can reintroduce asymmetry into the trade.

Uranium: Uranium and uranium miners have experienced a brisk rally, further boosted by Trump’s reaffirmation of the US government’s commitment to a nuclear renaissance. While the rally has been significant, a pullback is possible, but wouldn’t necessarily invalidate the bullish trend.

Copper: Copper is facing resistance around the $4 level, failing to sustain breaks above it. After a substantial two-month run from $3.50 to $4, a consolidation or even a reversion to the 50-day moving average is anticipated, potentially creating a tactical buying opportunity.

Fixed Income: 10-Year Treasury Note

The 10-year Treasury note market has been quiet but recently saw yields spike above 4.20%, reaching 4.30%. While the stock market initially recovered, yields have remained sticky at these higher levels. This development warrants close monitoring.

Trade of the Week: Bullish Play on Rare Earth Element Scarcity

The primary takeaway from the interview with Craig Tindale is that the choke point in the rare earth element supply chain isn’t mining, but rather the midstream processing – specifically, separation and magnet production, which are dominated by China. To capitalize on this strategic supply chain dynamic, the trade of the week is a bullish play on rare earth scarcity using the REMX (Rare Earth and Strategic Metals ETF).

• Structure: Long REMX shares paired with a short-dated downside put – the March 20th, 2026 $84 put (approximately 10% out-of-the-money), costing around $3.28 or 3.1% of the spot price.
• Rationale: This structure dampens near-term downside volatility while allowing participation in potential upside. The put option acts as insurance against an early pullback, and if REMX rises, the put expires worthless, representing the cost of insurance.
• Risk Management: REMX is already up 20% year-to-date, making the entry point more fragile and increasing the risk of a mean reversion. The put option mitigates this risk.

Research Roundup & Resources

Listeners can access the transcript of the interview, the chart deck, and relevant articles in the weekly research roundup email. Registration at macrovoices.com is required to receive the email. BigPictureTrading.com offers a 14-day free trial for those interested in learning how to implement these trades.

Conclusion

The market is currently navigating a complex landscape of shifting perceptions, geopolitical influences, and sector rotations. While bullish momentum exists in equities, driven by a change in sentiment surrounding Trump’s policies, vigilance is required. Commodity markets present both opportunities and risks, with gold and uranium exhibiting strong trends but also potential for pullbacks. The trade of the week focuses on a strategic play on rare earth element scarcity, utilizing a structured approach to manage risk and capitalize on a unique supply chain dynamic. Staying informed through resources like Macrovoices and BigPictureTrading is crucial for navigating these market conditions.