1. Moving the market

Equities rose early in the session as major indexes attempted to build on Friday’s recovery from correction territory. The latest retail sales report showed a 0.2% increase for February, which, although below the estimated 0.6% rise, relieved traders as the outcome was not worse.

Last Thursday, the S&P 500 entered correction territory, dropping more than 10% from its February high. Dip buyers stepped in on Friday, driving the index 2% higher and helping us delay our “Sell” signal.

Despite this, anxiety persists as traders struggle to keep up with Trump’s rapidly changing tariff policies and the cost-cutting efforts of the DOGE department, which impact the economy and corporate and consumer confidence.

The biggest 2-day short squeeze since last July helped stocks stay on an upward path, despite mixed bond yields. Gold bounced against its $3,000 overhead ceiling and managed to close above it, while the dollar broke below its recent trading range.

Bitcoin exhibited its usual volatility over the weekend, first falling to $82k before rebounding to nearly $85k.

Our domestic Trend Tracking Index (TTI) surged during the past two sessions, recovering almost all losses from the recent sell-off. See section 3 for more details.

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.