Trend Letter Blog

Markets Slide as Political Turmoil Erodes Confidence

Global equities tumbled Monday, driven by political instability, policy uncertainty, and rising trade tensions. Trump’s threat to fire Fed Chair Jerome Powell further undermined confidence in the Fed’s independence and the broader US financial system.

The S&P 500 heatmap was a sea of red, with Netflix a rare bright spot. Major tech names led the decline: Tesla (-5.75%), Nvidia (-4.51%), Salesforce (-4.45%), and Meta (-3.51%).

S&P 500 Technical Analysis

For the S&P 500, initial resistance is at 5,500 (lower red horizontal line); a break above that opens the door to 5,700 (upper red horizontal line). Support sits just under 5,000 (upper green horizontal line), with 4,800 (lower green horizontal line) as a key weekly level to watch.

Any positive trade deal headlines could spark a bounce this week, but further US–China escalation would cap upside potential. The longer uncertainty lingers, the greater the damage to the global economy, and declining business and consumer confidence is a long-term drag on equities.

For short-term traders, a dip to  5000 could trigger a bounce, but any rebound is likely capped at 5400.

Bond Yields Rising

Yields jumped on inflation fears, declining foreign demand, and policy chaos:

  • Tariff Shock: Trump’s April 2 tariffs first triggered recession fears, then inflation worries—pushing yields higher.
  • Foreign Selling: China and Japan cut Treasury purchases, while weak auctions and hedge fund deleveraging sent the 10-year yield to 4.5% intraday (April 8). Many allies, frustrated with Trump, see little reason to back U.S. debt.
  • Economic Risk: Higher yields threaten U.S. debt servicing ($37T) and consumer borrowing, deepening financial stress.

Flight to Safety

Gold hit a fresh all-time high at $3,422, now up 31% year-to-date, on pace for its best annual gain since 1979. Though technically overbought, it remains the go-to safe-haven. Trade war fears are driving investors, hedge funds, and central banks to unload US assets and pile into gold.

The primary retail buyers are in Asia.

Looking back to gold’s 2011 high, we see it trading within two parallel channels. The last time we saw intersecting channel, it marked a major low in late 2022 (lower white circle).

With the lines crossing again near current levels (upper white circle), this could signal a potential short-term top. A meaningful pullback from here could present a solid buying opportunity.

Bitcoin Rallies as Dollar Slides

Bitcoin posted its strongest day in weeks, fueled by a combination of macro pressures and renewed institutional interest. Confidence in traditional assets took a hit as Trump’s attacks on the Federal Reserve and its leadership weakened the US dollar, driving investors toward Bitcoin as a hedge. Meanwhile, institutional demand picked up, highlighted by Japan’s Metaplanet buying 330 additional BTC and strong inflows into US Bitcoin ETFs.

Bitcoin is now testing initial resistance at $88.3K, with major resistance at $92.5K – the same level that served as strong support from November through December.

Keep your head on a swivel  – this is far from over!

Stay tuned!

Martin

A hedging strategy

Below is the weekend update from our hedging service Trend Technical Trader (TTT). TTT offers subscribers strategies to not just protect their wealth in declining markets, but to actually profit during market corrections/crashes.


Posted by Trend Technical Trader

The DJIA plunged last week, which should have come as no surprise to our readers.

Thursday a 386-point bounce began within just a few points of our predicted “around the 25200 level”, then markets dropped further to close near the lows of the day.  Friday’s trading was choppy but eventually markets rallied into the close.

A 287-point gain Friday in the DJIA is not impressive or an indication of strength after the 2052-point drop the senior index suffered the past week-and-a-half from peak to trough, however the rally is likely to continue another day or two.

Reiterating what we wrote on Wednesday:  While it’s true that market drops often end in October, we must ask which October?  Don’t presume it’ll be 2018.  All fundamental, historic, technical and sentiment indicators suggest a protracted bear market started in February as we’d stated emphatically at the time.

Rallies since then have only served to lure buyers into an epic top.

Recall that at the end of June we showed you our proprietary momentum indicator that has triggered shortly before each of every single major market drop of the past 30 years, warning that months of gains would be lost in days.  That’s what happened the past week-and-a-half and with that the DJIA is exactly back to where it was at the end of June, on its way much lower.

It’s not different this time.

Wednesday we correctly warned that “stocks are only slightly oversold on a short term basis, while in the intermediate and long term markets remain extremely overvalued with sentiment indicators highly elevated.  This week was just a very small “blip” in the longer term.”

This remains true, and in fact some of our historical technical measures suggest that stocks are overbought even in the short term.

As we’ve written before, small-caps tend to lead general market speculation up and down thus recent lows in the RUSSELL 2000 signaled trouble.  Today small-caps barely closed higher on the day (up less than one tenth of 1%), finding support at the 2018 break-even level.  We expect these to continue to lead the charge lower.

Most troubling is that key financial stocks are at 52-week lows.  We’ve often used these as market proxies which is what allowed us to confidently state that a plunge was due despite some major indexes hitting new all-time highs in the past month.  If you think general markets will charge far higher while global financials are in a massive and ongoing rut, you’re mistaken.

Thursday VXX hit a high of $38.69 so if you sold one of your VXX positions as suggested “near or above $37” then that’s coincidentally roughly a 37% gain in a week.

If you seek to reset that speculation we suggest doing so around $32 should it get there.  Those more conservative may wish to wait for a price back below $30.00

Wednesday we also predicted that margin calls may force covering of the record level of short positions in gold, and on Thursday precious metals did enjoy the largest 1-day rally in months.  Be aware however that as stocks sell-off globally in the weeks and months to come gold may be sold as well.  That’s what happened in 2008, proving that there’s no “flight to safety” among speculative classes when margin calls come due.  Cash will be king going forward.

Always adhere to prudent stops as posted.

We also enjoyed gains this week in our coffee position, via BJO, which rallied to a nearly 3-month high, now up 14% from our entry in August, complimenting our commodities gains booked earlier this year in cocoa and the Swiss franc.

Perhaps surprisingly Tesla Motors did not drop much this past week despite the general market plummet, catching bids just above its 200-week moving average though we still enjoy healthy gains in that short position.

There will likely be wild swings in Tesla, as is normal in any highly polarizing story stock with a cult-like following, but in time we’re confident it’ll be far below $100 as it should continue to grossly underperform vs. stocks in general.  Further, we expect that per the increased scrutiny of ongoing Department of Justice and S.E.C. investigations more and more of the company’s projections and accounting, along with the CEO’s very liberal concept of the truth, will be revealed as fraudulent.

Our Monthly Indicator is still bearish.

Update on Short positions:

At the extremes this week our five short positions were:

+44%, +40% and +16% in one week since entering, +37% in 1 month since entering, and +19% in 5 weeks since entering.

Two of our gold positions were +31% and +30% in 1 month since entering.

New position:

Given our bearish outlook overall, an outright long position may come as a shock however there are always exceptions.

We are recommending a new BUY Stop on a lithium company that is profitable and enjoys a competitive moat, and could be a major story stock in the future as battery technology improves and proliferates. Note: This recommendation is for paid subscribers only

To become a paid subscriber and receive all of TTT’s recommendations and market commentary, all at a Special Discount price of $399.95  (regular price is $649.95) CLICK HERE