MW Stock traders' 'WTF indicator' is going off. Why that is a bullish sign - at least for now.
By Joseph Adinolfi
WTF stands for 'what the fudge', of course
A lot of traders were puzzled by Monday's stock gains. That probably means this rebound has more room to run in the near term.
Many investing professionals probably expected the S&P 500 would fall on Monday. Instead, the index rose 1%, finishing at its highest level in almost six weeks.
Oil prices shot higher after President Donald Trump said he would launch a blockade of the Strait of Hormuz following the failure of U.S.-Iran talks in Pakistan over the weekend. As Monday's session dragged on, oil prices (CL.1) tapered their gains, but still: Lately, higher oil prices have generally coincided with weaker stocks and bonds. Instead, both were trading in the green, with the yield on the 10-year Treasury note BX:TMUBMUSD10Y down 3 basis points at 4.292%.
Wall Street investors who spoke with MarketWatch said they were puzzled by the move. But Brent Donnelly, president of Spectra Markets, offered a novel theory about what might have driven stocks higher on Monday. In commentary shared with MarketWatch, Donnelly highlighted what he called the "WTF indicator."
"This indicator (which stands for: What the Fudge?) triggers when every person I am talking to is asking 'What the fudge?' about a move. This is happening this morning in stocks. People are beside themselves with some mix of confusion and rage because stocks are barely down," Donnelly said in written commentary.
"That's bullish," he added.
A vibes-based assessment
When asked by MarketWatch via email if he could elaborate about specific observable metrics, Donnelly said there really aren't any. The "WTF indicator" is more of a vibes-based assessment, he said.
"The annoying thing is this is more of a short-term thing and it's not really a function of positioning metrics...it's more an observation when speaking to other traders," he said.
"It is revealing that the thing that everyone expected to happen or expected 'should' happen is not happening. And thus, that usually means that everyone is trapped in the position suggested by what should happen. And when they capitulate one by one...the market goes the 'illogical' way for much longer than people can remain in the position."
While Monday's move left many investors scratching their heads, others have furnished explanations for why U.S. stocks have outperformed their international rivals since the start of the conflict, after lagging behind earlier in the year.
Pressure points
Brad Conger, chief investment officer at Hirtle Callaghan, said that the fact that the U.S. is a net energy exporter has likely helped insulate stocks from some of the fallout. But more importantly, in the U.S. at least, investors are operating under the conviction that both the U.S. and Iran are motivated to find an offramp for the conflict.
This is due in part to just how ingrained investors' belief in the "TACO trade" has become, Conger said. Traffic through the Strait of Hormuz is still well below its pre-conflict levels, despite a modest uptick seen over the weekend. But Trump's decision to blockade the strait might actually prove to be a winning strategy, Conger said. That's because it will put pressure on China, which buys much of the crude oil exported by Iran.
"There is a chance that this will work, that maybe the Chinese go to the Iranians and say 'What is it going to take for you to come to terms with the Americans?'" Conger said during an interview with MarketWatch.
"That would be the logical explanation for the market today; Trump is looking for an exit, the Iranians need an exit, and somehow, we're going to find it."
Pressure on the global energy trade has continued to mount. According to data from trade and analytics platform Kpler, 14 ships transited the strait on Sunday, while even fewer have exited or entered each day since the U.S. and Iran agreed to two-week cease-fire last week.
There are other reasons why investors might be interested in buying stocks now. Dave Sekera, chief U.S. market strategist at Morningstar, said that, according to Morningstar's metrics, the U.S. equity market is about 10% undervalued. Wall Street analysts have continued to raise their 2026 earnings estimates, even as economists have warned about the possible blowback for the global economy due to the conflict.
Positioning metrics tracked by Deutsche Bank and others have shown that many different types of investors, from the retail crowd to sophisticated hedge funds, have dialed back their exposure to stocks, creating plenty of room for the market to continue to lurch higher from here.
Sentiment gauges, like a weekly survey from the American Association of Individual Investors, have shown that, through last week, respondents remained bearish. Typically, bearish sentiment readings are a counter-indicator, suggesting the market can move higher as investors change their tune.
That being said, Sekera believes investors still need to keep an eye out for the potential economic blowback from the conflict. Last Friday's CPI report showed March's headline inflation came in at the highest level in about two years. Further upside pressure on inflation could create problems for stocks down the road, like it did back in 2022.
"I think the elevated oil prices and supply disruptions will drive a lot more volatility in the weeks and months to come," Sekera said.
The Nasdaq composite COMP finished higher on Monday, cementing a ninth straight day in the green, its longest winning streak since 2023. The S&P 500 SPX and Dow Jones Industrial Average DJIA also climbed.
-Joseph Adinolfi
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 13, 2026 16:13 ET (20:13 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments