1. Moving the market

Equities began the session slightly below their respective unchanged lines but accelerated to the downside late in the day, as market volatility continued. Traders focused on the latest tariff threats, with 200% import duties on all alcoholic products from EU countries in retaliation for the bloc’s 50% tariff on whiskey.

The Producer Price Index (PPI) was encouraging, showing its largest decline since April 2020, contrary to expectations of an increase. Combined with yesterday’s softer Consumer Price Index (CPI), traders’ concerns about the impact of tariffs have eased somewhat, but not enough to lift the major indexes out of their current slump.

The key question remains whether current import duties will have a greater impact on economic growth or prices. Traders generally believe that weaker growth is the overriding factor, leading to the pricing in of three rate cuts for 2025.

Despite the tariff-related struggles, the decline in equities this week has been gradual rather than a crash. This suggests that any easing of trade policy could lead to a sharp rebound, which is why I have been giving the TTI a bit more room to move.

However, as of today’s close, the domestic TTI has dropped 3.34% below its long-term trend line, signaling the end of the current “Buy” cycle that began on November 21, 2023.

Effective tomorrow, our “Sell” signal for broadly diversified domestic equity funds/ETFs will be in effect. In my advisory practice, I will liquidate our remaining domestic ETFs, which were well-hedged during the recent downturn, as our exposure to gold mitigated most of the equity drop.

If there is a sharp rebound tomorrow, I will hold off for another day; otherwise, the “Sell” signal will be executed.

Bond yields dipped slightly, but the overall uncertainty benefited gold, pushing the precious metal close to the $3,000 mark. Bitcoin, on the other hand, fell back towards $80,000, nearing a point that could signal a bullish move.

As ZH noted, global liquidity will lift many boats.

1. Moving the market

Today’s better-than-expected CPI report gave the major indexes a positive start, with all of them opening higher and maintaining that trajectory throughout the session.

The Consumer Price Index increased by 0.2% for the month, resulting in an annual inflation rate of 2.8%, which is lower than the estimated 0.3% monthly increase and 2.9% annual rate.

The Core CPI, which excludes food and energy prices, also rose by 0.2% for the month and 3.1% over the past 12 months, both figures coming in below expectations.

This data alleviated recent fears, at least temporarily, that Trump’s trade policies would lead to higher inflation and slower growth, potentially causing “stagflation.” Traders are now considering the possibility that this outcome might give the Federal Reserve some room to cut interest rates later this year.

Looking deeper, there is a notable divergence as the widely followed S&P 500 index is outperforming its equal-weight counterpart, indicating that today’s rally was not broad-based.

Bond yields edged higher, as did the dollar, but its weakness during afternoon trading pushed gold to near-record highs. Bitcoin remained rangebound and closed roughly unchanged.

Another divergence that could threaten equities is the S&P 500’s apparent disconnect from economic data points.

1. Moving the market

After a brief early bounce, the major indexes resumed their downward trend from yesterday. The S&P 500 made two attempts to reclaim its unchanged line but ultimately failed to hold on.

In a post, Trump announced that additional tariffs of 25% on Canada and Mexico would take effect on Wednesday, targeting steel and aluminum. When asked about a potential recession, he described the economy as going through a “period of transition.”

Traders were spooked, escalating fears of an economic recession, which would negatively impact equities. Consequently, Citigroup downgraded its rating on U.S. stocks from overweight to neutral.

Delta Airlines also slashed its earnings outlook due to weaker demand, causing their stock to drop by about 5%, further contributing to negative market sentiment.

An afternoon rebound helped equities recover from their worst levels, but the session still ended with a moderate decline.

Bond yields edged higher, the dollar slipped, while Bitcoin surged from yesterday’s $76k level to $83k today. Gold also rallied, reclaiming the $2,900 mark.

The markets remain on edge, teetering between further breakdown and recovery. Much will depend on the latest tariff headlines from Washington.

1. Moving the market

Last week’s selling pressure continued this morning and intensified in the afternoon, dragging down the major indexes.

Traders were fixated on Trump’s comments about a possible economic slowdown and the potential for a recession following the implementation of US tariffs, indicating the economy is entering “a period of transition.”

The tech-heavy Nasdaq was hit the hardest, with the Mag7 basket experiencing its largest overall market cap decline ever. Notable losses included Tesla (-15%), Alphabet (-4%), Nvidia (-5%), and Meta (-4%), with Meta erasing its 2025 gains.

The recession scenario has been looming over the markets for some time, as tariffs can drive prices higher, increasing inflationary trends and causing the Fed to hesitate on much-anticipated rate cuts. These rate cuts are crucial drivers of any bull market.

Critical data points are on the agenda this week, highlighted by Wednesday’s CPI and Thursday’s PPI reports. While the major indexes managed a small bounce into the close, the damage was done, with all technical support levels broken. The Nasdaq led the decline, registering its biggest daily drop since September 2022.

As ZH pointed out, the Fed is unlikely to intervene, as the issue is not just a lack of growth but the reemergence of inflation, bringing “Stagflation” back to the forefront.

Bond yields tumbled, Bitcoin headed lower and appears to be in sync with global liquidity, which could lead to the next leg higher if history is any indication. The dollar edged higher, while gold dropped slightly below its $2,900 level.

Our main directional indicator, the TTI, also dipped below its long-term trend line, signaling a shift from bullish to bearish sentiment. For more details, please see section 3 below.