In the face of confusing but potentially beneficial changes to Trump’s tariff policies, futures have continued melting up. No doubt, there is plenty of short covering. The other factor, of course, is the effect that a 15% crash in VIX is having on algos.

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Don’t look now, but DXY has almost fallen to our 98.976 target from last year. The culprits are numerous, led by the euro and yen which are both soaring relative to the greenback. The EURUSD has broken out and has nearly reached our 1.15 target.

These moves represent a very serious development for US markets, as the targets were initially established as part of a worst case scenario in 2024 and are exacerbated by a breakout in the 10Y yield.

The breakout in the 10Y is contrary to (temporarily) tame inflation and, as we have discussed, is consistent with a rejection of the USD and of Treasuries at a time when they would normally be buoyed by a flight to safety.

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It was Mar 23, 2020. The COVID pandemic had scared the crap out of markets. The S&P 500 had dropped 35% in about a month and, to make things worse, a dreaded death cross was only 50 points away.

Death crosses, where the 50-day moving average drops below the 200-day, are well known to investors – technicians or not.They often usher in dramatically lower prices such as in 2007-2009 when SPX shed 54%.

On Mar 23, 2020, SPX’s approaching death cross promised to add to the pain already experienced by markets roiled by the pandemic. The Trump administration, which had badly fumbled its public health response with such brilliant advice as injecting bleach, was paying much more attention to the stock market than the health crisis.

Congress and the Fed sat on their hands as Trump press conferences and tweets were increasingly frantic. Finally, with the Dow back to the lows last experienced on election night 2016, the market bottomed in response to a concerted effort to prop up stocks.

It started in the after-hours on a Sunday night with a press release by Treasury secretary Mnuchin that promised $4 trillion in financial stimulus. The Dow gapped higher, closing +13.4% off its Friday lows. The S&P 500 gained almost 12%.

By the time the death cross occurred on the 27th, SPX had rebounded a stunning 20%. It was a remarkable rally that any active investor will remember well. Many of us were reminded of it yesterday when the S&P 500, which had already dropped more than 20% from recent highs (the definition of a bear market) was so close to completing another death cross.

I imagine there were very few active investors who weren’t thinking about the death cross, with many of them recalling the 2020 incident and some of us anticipating a repeat. As we wrote yesterday:

Note that SPX/SPY are about to experience a death cross – where the SMA50 drops below the SMA200. In a manipulated stock market such as we have, this is often a point at which the manipulators jump in to avoid the downside such a move entails.

It came as little surprise yesterday when Trump announced that he was going to pause some of the tariffs which had set the financial world on fire last week. Oh, and it would be nice if investors would thank him for putting out the fire that he set.

Only, the fire isn’t out. Despite March’s rather tame CPI print released this morning, the tariffs still in place will undoubtedly increase inflation. Despite the phalanx of foreign trade representatives supposedly lining up to kiss Trump’s ass, the average effective US tariff rate is still over 25%.

As we’ve pointed out many times, tariffs are a tax on the American people. They are also regressive, affecting lower income Americans more than the wealthy Americans who will benefit most from the $2 trillion in tax cuts theoretically financed by tariff income (with assistance from $880 billion in Medicaid cuts.)

It’s such an outrageous “steal from the poor and give to the rich” scheme that Republicans can’t figure out how to sell it to their constituents who are increasingly alarmed.  Give the American people credit for recognizing the coming wave of inflation (and bothering to read their 401(k) statements.)

Speaking of which, it seems at least a few investors have noticed that the tariff fire is still smoldering. Futures are off almost 2%.

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Futures were all over the map overnight as 104% tariffs were levied on China. China responded by raising their tariffs on US goods to 84%.

The turmoil also roiled treasury markets, where rumors of China divesting itself of US treasuries resulted in a breakout in the 10Y and the 2s10s.

Equities have hit both our downside and bounce targets well ahead of schedule.

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SPX nailed our next downside target yesterday…

…, setting up a nice bounce in the after-hours. continued for members… (more…)

The disarray out of the Trump administration continues, with Navarro spewing a stream of consciousness word salad on CNBC this morning while Trump spent the weekend working on his golf game.

ES is off another 3% this morning, but has been all over the map – even backtesting our 4859 target at the IH&S it completed back in December 2023.

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Futures are off another 3% after yesterday’s 4.50% debacle.  ES has plunged through our 5301 target and is fast approaching our 5153 target.

Although it’s a nonsense index, rumor has it that “certain people” follow the DJIA quite closely. This channel dating back to 2022 just broke down yesterday.

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Futures are off nearly 4% in the wake of Trump’s announcement of very severe tariffs which nearly everyone outside his administration agrees are a huge mistake. It’s merely the latest unforced error that this brain trust has unleashed on the economy and the markets.

ES has reached our 5501 target, with more to come.

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It’s finally here, and markets aren’t too optimistic as the session gets under way.  It’s the last chance to position for whatever chaos is about to ensue – which, for many investors – means taking defensive positions.

It was hard to get very excited about yesterday’s reversal, as SPY never could push past a backtest of the flag pattern which broke down last Friday.

Incidentally, I was curious about the origin of the word “tariff.” The Wikipedia page is interesting, and includes a snippet of what pretty much everyone outside of the White House thinks:

There is near unanimous consensus among economists that tariffs are self-defeating and have a negative effect on economic growth and economic welfare, while free trade and the reduction of trade barriers has a positive effect on economic growth

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Futures are off modestly in the lead up to Trump’s tariff announcement. Although yesterday’s technical bounce proves that bulls are still raring for a rally, the downside potential is very large if the tariff announcement isn’t, as Trump puts it, “nice.”

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