Good morning,
Happy Friday on this Thursday of a holiday shortened week. Thanking God for one less day of market turmoil and personal angst may be more appropriate than usual since the reprieve is due to U.S. Exchanges’ observance of Good Friday.
Yesterday, with authority, the market closed the case for the extension of the market’s bounce rally signaled by the highly reliable reversal in the daily sentiment indicator from its extreme lows. The equity market’s reversal from down 19% on the S&P 500 Index was sharp but short-lived compared to historical signals against a cyclical bull market backdrop. It has been my concern all week that the recent signal’s strength may be diminished by the change in trend backdrop from bullish to bearish. The short-lived signal is more evidence that the cyclical trend of the market changed following Liberation (now Obliteration) Day.
Yesterday’s selloff started off with Nvidia’s 7% price plunge after it announced it would incur a $5.5 billion charge due to new U.S. export restrictions on its H20 AI chips to China. These chips were specifically designed to comply with previous U.S. regulations, but the latest measures have further tightened controls. Selling really got going, however, when Fed Chair Jerome Powell continued to emphasize that the central bank is in no hurry to cut interest rates to shield the economy – and, in the process, markets — from the blow of the Trump administration’s tariffs. Evidently, some traders were holding out hope because the market dropped over 3% on the Chair’s comments, though it recovered a little by the close to end the day off -2.2% on the S&P 500 Index.
What happens today is anyone’s guess with the White House pumping out tweets calling for Fed Chair Powell’s termination (due to yesterday’s comments), tariff progress or lack thereof, and traders who are likely flattening positions ahead of the extended weekend. Futures are up +.60% pre-market but will go in whichever direction the next White House comment leads them.
Be well,
Mike