The Bulls Are Back in Charge and It’s Their Game to Lose
Can the market build on optimism and produce a sustained recovery? Here's what is most important right now.
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A strong session on Monday has triggered hopes that the market is set for a sustained recovery. The primary catalyst for the jump in the indexes were comments from President Trump about exceptions to his reciprocal tariff policies. There still is very little clarity about ultimate tariff policies, but market participants were pleased to see that there is quite a bit of flexibility as to what will be put into place.
The question now is whether the market can build on this optimism and produce a sustained recovery. While the S&P 500 briefly hit "correction" territory on March 13 it has rebounded and now sits above its 200-day simple moving average. Still, it has quite a way to go before it tests its 50-day simple moving average at around 5914, and it is very unlikely that it will make that journey in a straight line.
The 1.7% rise in the S&P 500 on Monday gives the bulls the advantage, but they face a number of hurdles if they are going to produce a sustained uptrend. The biggest hurdle remains tariffs. While Trump is indicating a great amount of flexibility, he is also making it very clear that he is going to be aggressive in putting them in place against those countries with the biggest trade imbalances. It is still highly uncertain and very likely to cause market volatility as the news is released.
Another issue the bulls will face is that there are still signs of a slowing economy and sticky inflation. Atlanta Federal Reserve President Raphael Bostic said on Monday that he sees just one interest-rate cut in 2025 and is concerned about the impact of tariffs on inflation. Interest rates have fallen over the last three trading sessions, but they are likely to spike back up if tariff worries return.
Consumer confidence will be reported on Tuesday morning and will provide a reading on sentiment about the economy. It has been eroding as signs of economic slowing have been increasing. Consumers, just like the stock market, are confused about tariffs and are nervous about how effective Trump’s economic policies will be.
Technically, the indexes have to battle through some significant overhead. What is most important right now is that pullbacks remain fairly shallow and that key support levels not be breached. The major focus will be the S&P 500 lows of 5504 that were hit on March 13. If that level comes close to being retested, then it is going to be very ugly. However, the bulls are in charge right now, and it is their game to lose.
At the time of publication, Rev Shark had no positions in any securities mentioned.
