As the market digests the ongoing conflict between the United States and Iran, traders are experiencing a whipsaw effect. Following President Trump’s address to the nation, futures sold off overnight, only to bounce aggressively mid-morning on reports of Iran drafting protocol with Oman for Straight traffic. The SPX gave up 20 basis points after being down 140 basis points at its lowest point. Meanwhile, WTI crude oil prices surged 11.5% to $111 per barrel.

Despite the volatility, squeeze risk remains a relevant concern. According to PB Stat, US-listed ETF shorts rose by 17.2% in March alone. Most Liquid Short (GSXUMSAL) added 175 basis points, High Beta 12M Losers (GSCBLMOM) gained 105 basis points, Memes (GSXUMEME) increased by 184 basis points, and AI-at-Risk (GSTMTAIR) rose by 57 basis points. Some notable laggards include Industrials (GSXUINDU), Materials (GSXUMATR), and Discretionary (GSXUCOND).

Looking ahead, we estimate that nonfarm payrolls increased by 70,000 in March, with a 32,000 boost from the end of worker strikes and a moderate tailwind from sequentially better weather after it likely weighed on February payroll growth. However, we expect a 5,000 decline in government payrolls.

In terms of volatility, market strategist Brian Garret notes that there have been some protection unwinds (SPX downside, June may), with the VIX index currently at 25.2, which is the lowest level heading into a “green dot weekend” since February. Derivatives volumes are running up 11.5% versus the 20-day average, which jives with some hedge unwinds following the Oman headlines. Additionally, the vol market is “less scared,” as evidenced by the Monday straddle being 1.5%, which is less than recent and gives traders an extra session.

Overall, while the conflict between the United States and Iran remains a significant factor in market sentiment, there are signs of a potential bottom forming in the near term. However, with geopolitical tensions still at play, caution is advised when making investment decisions.