There was nowhere to hide, and there were no consolation prizes yesterday. This was a classic capitulation session as the Volatility Index (VIX) spiked to its highest point since last year’s Bank of Japan’s scare.

Technical View

After the S&P 500 (SPX) failed to regain its 200-day moving average, it became vulnerable to 5400. This has been a mix of resistance and support, and I would usually be encouraged that it would hold. There is some support around 5200 and then 5000, which would indicate a dramatic oversold condition.

Interestingly, while the volume was higher than expected, it didn’t match the hysteria of the session.

The Relative Strength Index (RSI) and Rate of Change (ROC) also suggest a little more room to the downside before sending strong oversold signals.

The Fed Put

Some people believe the ‘Trump Put’ is still in play, even though the president has had no qualms about saying and doing things he knew would harm the market and fuel his critics. This is a bold gambit to match the stakes at this moment in time.

There is a serious debate on the role of the Fed in all of this. One camp is arguing against rate cuts because inflation fears will keep the Federal Open Market Committee (FOMC) in check,  yet the CME FedWatch Tool is now predicting four rate cuts.

Listening to Fed Powell very carefully, it's clear that he sees the impact of tariffs as transitory, and he will be more focused on the potential recession as the *wealth effect erodes.

*Restoration Hardware (RH), a proxy for wealthy consumers, was slammed by more than 40%.

Upside market-moving events will be deals made before April 9^th.  Meanwhile, today’s jobs report looms large.

Today’s Session

There is a lot of hand-wringing about what Jay Powell will say later today.  The experts say the Federal Reserve cannot cut rates due to the threat of inflation.

While we are in the initial negotiation phase of the trade battle, Powell made a statement at the last FOMC, indicating that he generally thinks this event will be transitory.

This Fed has delayed actions on hikes and cuts. Consequently, their initial actions felt rushed and panicked.

It was a good jobs report, but there were revisions and more government jobs than I anticipated.

The move in the U3 unemployment rate to 4.2 percent gives Powell room to sound more constructive.

By the way, the CME Fedwatch is now forecasting five rate cuts.

Stay tuned for our afternoon note. 

Comments

And the bleeding continues. Someone please call a doctor. I'm regreting not cashing out in February. Malcolm Lee Gibson on 4/4/2025 8:06:20 AM

The big question for me is where is the bottom, I too wish I had cashed out in February retirement is going to have to wait for another year or so (boo!). Ready to put some cash to work but when and where. TOM PRITCHETT on 4/4/2025 8:22:44 AM

Charles.. please. stop the support level nonsense. It no longer exists. Dave Nederostek on 4/4/2025 10:01:25 AM

The next hand full of days, leading up to April 9th will definitely be interesting. While it is likely that some form of tariffs will remain across the board after. If trade deals are accomplished, allowing the currently stated %'s to be reduced on some countries. Perhaps closing the gap between what was expected by the market analysts prior to what they will be in the end, will be seen as a market positive. One thing missing in most articles around it being inflationary, are the details around what the impact truly is, around the tariffs involved by country. After all, there is a big difference between the impact on groceries (where food and energy are excluded from Core CPI numbers) vs. buying a foreign made auto or parts imported for domestic assembly for example. China is the wild card in this, as we (US corporation) have given away way too much production to them around the cheaper labor aspect for decades. It's the "Art of The Deal" and have to wait and see how it plays out. Terry Dowler on 4/4/2025 10:08:40 AM

One must have the fortitude to wait for the pendulum to swing the other way once again. Think about it. The actual impact of tariffs on prices has not hit the shelves yet. This drop is pure speculation. Yawn! P. Krueger on 4/4/2025 10:49:09 AM

Transitory, Huh! Sounds Familiar? Charles Haselberger on 4/4/2025 10:52:25 AM

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