One thing you definitely can’t say about this market is that it’s boring. If you’ve traded through—and survived or even thrived—during the past week of price action, give yourself a well-earned pat on the back. It’s been extreme. As of now, Monday’s gap down appears to have formed a capitulation low, and with a little help from Donald Trump, we’ve retested nearly the entire “Liberation” drop from last week.

Don’t expect the volatility to vanish overnight. Many of the market’s underlying concerns are still present, but the more immediate and menacing issue—tariffs—has been temporarily pushed aside. With all tariffs reduced to 10%, except for China, which was hit with a massive 145% tariff, the stock market found some room to breathe. The same can’t be said for the bond market.

SPY

The bond market essentially forced the Trump administration to pivot, nearly imploding on Monday as the 20- and 30-year yields spiked around 5%. Credit where it’s due—Trump and his team took the hint and adjusted course. It had to be the administration that moved here, because the Fed’s hands are tied. They’ve been the backstop since 2008, but not this time. Ever since the Fed cut rates on 9/16/2024, long-dated bonds have been in a freefall. The Fed can’t risk stepping in to save equities right now because the bond market is much larger—and far more critical to the government.

This year, the government needs to refinance somewhere between $8 and $10 trillion in debt. The reports vary, but what’s a few trillion among friends? This refinancing will rely heavily on long-dated bonds, and with the servicing costs already exceeding the annual defense budget, refinancing at these elevated rates would put even more pressure on the nation’s debt load. Even though inflation came down to 2.4% for March, the bond market doesn’t care. Logic would suggest that with a possible global recession on the horizon, investors would flock to bonds—but that hasn’t been the case. Apparently, the bond market is still more concerned about inflation, which effectively takes QE off the table for now.

TLT

Looking at some of our go-to equity charts, the verdict is mixed on whether the low is in. IWM and RSP still look vulnerable and could easily roll over for another leg lower. On the other hand, SMH and QQQ are showing more relative strength, while SPY sits somewhere in the middle. Since SPY and QQQ printed $50 candles on Thursday, we could easily chop inside those ranges for a while. Realistically, if volatility were back to normal, we might be stuck inside that candle for another two months before anything meaningful happens. But volatility is still extremely elevated, and the market remains on edge.

IWM

On Thursday, QQQ technically hit a limit-down level, dropping 7% and triggering a 2 minute timer. Since it bounced at that level for two minutes, the breaker was reset to 13% lower—or at least, that’s my understanding of how it worked and why the market did not get halted on Thursday.

As I mentioned in Wednesday’s newsletter, these kinds of massive candles don’t typically show up in bull markets. They’re more common in bear markets, especially during peak fear. Wednesday’s “lightsaber” candle likely marked the low for now, but I wouldn’t be surprised to see that low taken out before all is said and done.

Thursday’s candle on QQQ and SPY retraced just past the 61.8% fib level and closed well above the 50% retrace and the 100-week SMA. That’s a solid sign the bulls are trying to hold this market up and could help us grind higher toward some upper targets where we can hedge positions and lock in gains in case the market rolls once again.

QQQ

To sum up my current thesis: I expect the market to move higher over the next couple of weeks, with a good chance we chop inside Wednesday’s candle longer than most would like. If we can break above that candle, the long-term daily moving averages will likely serve as resistance—and as targets for my bullish positions. That’s the level where I’ll start to get more cautious and watch for a potential larger rollover. Until then, I’ll be looking to buy the dips and continue selling options into this elevated volatility.

This is an ideal time to be selling puts on companies you’d love to own at prices you’d be happy to pay. Over the last 36 trading days, I’ve posted six put sales that brought in $722.00 in premium—enough to pay for over a full year of the RLT Newsletter. On Thursday, I posted four more put sales, for another $458 in premium set to expire next week. If you’re not already part of our thriving RLT Newsletter community, now’s the ideal time to join.