Near-Term Technical Bottom Is In (For Now)
What changed this week....
After a month-long slide that had investors gripping their seats, the SPY appears to have carved out a major bottom on Wednesday, April 9, 2025. So, what’s changed, and is it time to start buying dips again for a shot at new all-time highs? In today’s blog, I’ll break down the recent action, the short-term case for buying, and what I’m watching for that could signal another leg down. Until then, I’m leaning toward buying dips for a potential squeeze.
The Setup: A Wild Ride in the SPY
Let’s rewind. The SPY, tracking the S&P 500, has been under pressure since early March, driven by escalating fears of a global trade war sparked by President Trump’s tariff policies. Posts on X captured the sentiment: markets were jittery, with some calling for another 10-20% pullback as tariff talks dominated headlines. By Monday, April 7, the SPY was testing key support levels, and I warned against buying the dip prematurely. Was that the right call? I think so—jumping in too early could’ve meant catching a falling knife.
But Wednesday’s premarket action changed the game. The SPY gapped up sharply, with the S&P 500 closing up 9.5% that day after Trump announced a 90-day pause on tariffs for many countries (except China). This was a monster rally, erasing a chunk of the prior losses and signaling a potential shift in momentum. Volume spiked, and breadth indicators showed broad participation—classic signs of a short-term bottom.
So, what flipped the script and turned extreme fear into cautious optimism?
The Trump Flinch
The catalyst was clear: Trump blinked. After weeks of aggressive tariff rhetoric—slapping 145% tariffs on China and threatening dozens of countries with reciprocal levies—the administration pulled back. On April 9, Trump announced a pause on country-specific tariffs (except for China, where tariffs climbed to 125% plus a 20% fentanyl-related duty). This reprieve calmed markets, with the SPY rocketing higher as investors breathed a sigh of relief. Reports noted that bond market turmoil, with yields spiking to 4.5%, may have pressured the White House to ease off.
The pause isn’t permanent—tariffs could return by July—but for now, it’s given markets a breather. Tech stocks, spared from China tariffs on smartphones and computers, led the charge, with names like Apple and Nvidia posting gains. Meanwhile, China’s retaliatory 125% tariffs on U.S. goods kept tensions alive, but the broader market focused on the de-escalation elsewhere.
The Case for Buying Dips
Here’s why I’m leaning bullish for the short term and eyeing dips as buying opportunities:
Momentum Shift: Wednesday’s rally was a masterful play by bulls to catch shorts imho. The SPY cleared 525 running all the way to 548. Dips on Thursday and Friday, were bought, suggesting bulls are regaining control.
Squeeze Potential: Short interest in SPY and related ETFs has been climbing during the sell-off. With the tariff scare easing, shorts are vulnerable to a squeeze. A push above 550 could trigger covering, fueling a run toward 575, and a clearance of that with a move toward 585+
Seasonality and Earnings: April is historically strong for stocks, and JPMorgan’s earnings kickoff on April 11 showed resilience, with shares up 3.4% premarket. If other heavyweights follow suit, it could underpin a broader rally.
Policy Clarity (Sort Of): The tariff pause reduces uncertainty for now. While China remains a wildcard, the market seems to be pricing in a softer stance from Trump, especially after tech CEOs cozied up to him post-inauguration.
I’m looking to buy dips as long as 512.50 holds, with breaks of 525 being a cautionary.
What Could Trigger Another Leg Down?
While I’m bullish for now, I’m not married to the upside. Here’s what I’m watching for that could signal trouble and potentially send SPY into another tailspin:
China Escalation: China’s 125% tariffs are already biting, and their finance ministry hinted at non-tariff barriers targeting U.S. exports like beef and gas. If Beijing ramps up retaliation—say, by choking off more trade or dumping U.S. Treasuries—the SPY could retest 550 or lower.
Bond Market Blues: Yields on 10-year Treasuries hit 4.5% last week, spooking markets. If yields climb again, especially past 4.7%, it could reignite recession fears and crush equities. Keep an eye on the TLT ETF—if it breaks below 90, it’s a red flag.
Tariff Reversal: Trump’s pause is only 90 days. If he flips back to hardline tariffs before July—or if negotiations with the EU, Vietnam, or others stall—the market could lose its footing. A headline about renewed tariffs could spark another 5-7% drop below recent lows.
Earnings Season: I’m expecting many stocks to pull guidance this season. The question is, how will market react? Is it already priced in? Have consumers reigned in spending?
The Game Plan
For now, the technical bottom looks solid, and the tariff pause has given bulls room to run. I’m buying dips in SPY to take advantage of squeezes. But happy to short any over extension.
I am not a buyer/investor though for a multi-year long here. Too much uncertainty and I think we will need at least 2-6 quarters to change that especially given the mandate to bring manufacturing back to the US or make trading fair.
What do you think—ready to buy the dip or waiting for clearer skies? Drop a comment below!
