After a huge portion of Wednesday’s move was given back on Thursday and price fell below the highs of the preceding 3 days, this was a bearish setup potentially targeting new lows. Instead, bulls defended and formed a bit of a double distribution week. This is a good look for a low and sets bulls up to test further into the range of the week of 3/31 where the selloff accelerated.
With the news over the weekend or retraction and then added back or no exemptions, or these are not “exemptions” mumbo jumbo, if were were to trade lower then that would be a pretty bad look. Generally, if you’re a bull, you want liquidity below you first rather than above. However, after this news, it really needs to move higher and build the support needed. With that said, a loss of Friday’s IBH, 5340.75, would be an early warning sign for me and would open Friday’s low which may be considered a weekly pivot. Reason being is that Monday’s fake news spike, Tuesday’s morning high, Thursday’s 1hr candle bodies are all there. If we trade lower below Friday’s low, I would target Thursday’s low and be ready for a look below and fail using 5130-38. A hold of this then could rotate back up towards Friday’s high. Keep in mind Thursday’s low is not a concrete level as the remaining single print from Trump’s hail marry candle on Wednesday is still open (5088-5146.75) and can easily be filled. Therefore, if Thursday’s low fails to hold then a reasonable rotation to the bottom of balance is there or at least to the April 8 spike base 4993.
If we trade higher, buyers will want to reclaim 5426-44. This includes the CPI high and the breakdown from April 3rd. More importantly, a reclaim of Thursday’s high and spike 5473.75-5519.75. If we take out last week’s high this would bring the weekly into balance. A look above and fail would be problematic for buyers and would need 5426-44 to hold on a backtest from above. As with last few weeks, bulls have a lot of work to do and random news from the golden toilet may not always be on their side.
5529-34 and 5554-60 will be the two main areas above that buyers will want to reclaim above last week’s high. The true gap halfback is at 5561. I would expect sellers to begin to wake up around here; however, I believe the better area will be 5612-24 for them to defend. This is the LVN from 2024 and includes Friday March 28th low. Just below is the true gap at 5610.75 and at the moment, the ATH vwap at 5606.50.
In larger context, the main goal of buyers is to reclaim the Q1 low and Q1 close and hold it for Q2’s success.
Lastly, some ending thoughts….
Last week and this weekend, there were a lot of emotional people. In my opinion, this was never directly about tariffs. Tariffs were just the story. The timing of the escalation (within a correction) definitely made it a bigger correction. But big-picture, tariffs on their own, don’t really matter. The implications of tariffs matter. And that’s what will really swing the narrative. But ultimately, what will decide if this is a bear market or if it was just a correction and “up only” resumes is whether or not a recession or a spike in inflation that the Fed has to respond to with further hikes happens.
We still have a lot of uncertainty among businesses. Growth is slowing, and GDP for Q1 looks like it will be negative. Yields are blowing out and maybe that changes this week on some of this news and perhaps the selling was done? Still this makes valuations pretty stretched. They were near the highest they’ve ever been. Even buying 4800s with the 10-year near 5% wasn’t “cheap” in terms of equity valuations. For now, we act like it was THE low and keep assessing as we move forward but must keep the open mind that it may not have been THE low.