OVERVIEW
China Is Not Backing Down

Tensions between the US and China escalated again this week, with Beijing warning it will "fight to the end" if the US moves forward with a new round of tariffs. President Trump confirmed the US will implement a 50% tariff hike on Chinese imports, following China’s retaliatory 34% tariff on American goods. In response, China announced it will impose an 84% levy on US goods starting Thursday, after US tariffs of 104% on Chinese imports went into effect at midnight.

China’s Commerce Ministry condemned the US actions as “blackmail” and threatened further retaliation if Washington continues its aggressive stance. Trump, however, remains firm in his position, reiterating his goal of eliminating trade deficits. “To me, a deficit is a loss. We’re going to have surpluses, or at worst, we’re going to be breaking even,” he stated from the White House.

Elsewhere, other countries are bracing for the impact. Trump hinted at prioritizing Japan in future trade talks after a recent conversation with its prime minister. Stock markets, highly sensitive to trade developments, saw a slight rebound on hopes for diplomatic flexibility.

In addition to China, the US has introduced a blanket 10% tariff on all imports and new duties targeting 185 countries accused of unfair trade practices. These measures, effective April 9, have already prompted retaliatory tariffs from countries like Canada and the EU, raising concerns about a wider global trade war.

Businesses are beginning to respond, mainly by raising prices, as the world adjusts to a more protectionist trade environment.

MARKET
There Is No Confidence In US Equities

Right now, it almost goes without saying that we are in the midst of a global market crisis, where the turmoil spans across every asset class—bonds, equities, and currencies. From the US to Europe to Asia, we are experiencing an unprecedented period of pain, with no clear safe haven in sight. Investor confidence in the US has completely shattered, and foreign investment has essentially dried up. No prudent foreign entity is willing to maintain substantial exposure to the US right now. The level of uncertainty is staggering, and the global markets are feeling the full force of this instability. With no clear resolution to the numerous economic, political, and financial challenges we face, it's increasingly difficult to see a quick recovery.

To put our current position into perspective, the S&P 500 is on track for the third-fastest 20%+ drop from an all-time high in market history, with only the COVID crash and the 1929 crash being quicker. This illustrates just how severe and rapid the current downturn is, underscoring the depth of the crisis we're navigating.

Nasdaq

The Nasdaq has seen a rather shocking net inflow of new retail long positions in the past few sessions, as some retail traders believe this is a good time to buy the equities market “on discount.” However, based on our experience, this is nothing short of pure speculation and gambling. From a technical standpoint, we are much more likely to see further downside—at the very least, until we test the rising 200-week EMA at $388, which represents an additional -5% drawdown from the current level.

Looking at the weekly chart, yesterday’s session opened strong but quickly reversed, getting rejected exactly at the overhead supply zone identified by the Visible Range Volume Profile (VRVP) at $444. Now, we’re seeing a low-volume pocket that is expanding downward toward the $388 level. This indicates a likely continuation of the downtrend before any potential stabilization.

The growth sector, which the Nasdaq tracks, is on track for one of its worst performances in recent memory, and a significant part of this is due to the influence of the Magnificent Seven (MAGS). Take Nvidia alone, which has lost 40% of its value YTD, Apple is down -35% YTD, and Tesla has shed over 50% of its valuation. The momentum behind these moves is not just noise—it’s a genuine phenomenon in the market. When things start going down in a market like this, they tend to continue downward for a while, as the underlying technical and macroeconomic conditions suggest we’re still in the early stages of a much deeper correction.

S&P Midcap 400

The midcaps, which typically represent higher-risk sectors, are doing exactly what we expect them to do in times of uncertainty—they are massively underperforming. These stocks are by no means poised for a rebound anytime soon. The peak of yesterday’s weekly candle has already retraced even deeper, falling below MDY’s point of control. This is accompanied by some of the highest relative selling pressure we’ve seen in a while, with nearly 100% of last week's record relative volume already surpassed, and there are still three more trading sessions to go this week.

Russell 2000

Small caps are following suit, heading toward a critical test of their $170 point of control (POC) level, which is essentially the last line of defense from a technical standpoint. If this level doesn’t hold, the IWM (Russell 2000 ETF) is likely to plunge another $30 or so, heading toward its next most significant demand zone. This $170 POC is a key threshold—if it breaks, the downside risk increases dramatically, as the next area of support doesn’t come in until much lower, suggesting a sharp continuation of the current downtrend.

DAILY FOCUS
Raise Cash, Stay Defensive, and Hedge Against Further Downside

Right now, the global equity markets are in a full-scale collapse. It’s not just the US—stocks everywhere are getting hammered. The global market is in a phase of broad-based weakness, with no clear leader emerging to pull things back. The US market, despite being the largest, isn’t immune; investors are turning away from risk assets across the board. Global equities, including emerging markets, are feeling the strain, and even traditionally safe assets like the dollar are under pressure.

Key Points to Consider:

1. Global Equity Collapse: The global equity landscape is unraveling. No sector, region, or market segment is truly safe from the widespread sell-off. It’s not just the US or China—stocks from Europe to Asia are all experiencing sharp declines. The US, despite its size, is part of a much larger global picture, and with macroeconomic pressures mounting, no one is looking to go long on equities right now. Whether it’s trade wars, inflation concerns, or global economic slowdowns, all of these factors are contributing to a widespread collapse in asset prices.

2. Headlines Can Change Everything: The market is highly reactive right now. One headline—whether it’s a surprise tariff announcement, a central bank policy shift, or geopolitical unrest—can completely flip the market sentiment. Trying to time this tight market is a fool’s errand. No one knows when or where the bottom is, and attempting to catch a falling knife can end up being a huge mistake. The only certainty right now is that volatility is king, and it could take just one headline to change everything.

3. Protect Yourself, Don’t Time the Market: Now is not the time to make aggressive bets on a market rebound. Rather than trying to time a potential bounce, your focus should be on protecting yourself. Keep your cash on the sidelines. Yes, you’re not making huge returns by sitting in cash, but you’re also avoiding massive losses. Additionally, you do earn interest on uninvested cash, and in this environment, that is a massive win in itself.

The probability that we’ve seen the worst of this downturn is low—sub 50%. For the market to stabilize and begin recovering, we need a clear positive catalyst, such as a policy shift, a resolution of trade tensions, or stronger-than-expected economic data (this is likely going to be far from enough). Unfortunately, none of these catalysts are currently on the horizon. The US-China trade war continues to escalate with no signs of easing, and broader global economic concerns are adding to the uncertainty. Without a catalyst to trigger a shift in sentiment, the market remains highly susceptible to further downside.

Additionally, history shows that bear markets rarely hit a bottom and immediately rally without further testing lower levels. Bear markets tend to test the downside multiple times before finding a solid floor. Even when a sharp recovery occurs, it’s often followed by volatile consolidation periods before the market can truly turn around.