Market Rebounds on Bitcoin and Hope, But Here's Why It's Difficult to Trust
The question now is whether the market can set aside recent worries and produce a sustained rebound.
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After a week of struggles, the market finally rebounded on Friday afternoon and closed at the highs of the day. This may have been caused by end-of-the-month positioning and some very large buy orders at the close, but after six poor sessions in a row, it was a refreshing change.
The question now is whether the market can set aside recent worries and produce a sustained rebound. Worries about tariffs and a slowing economy have not gone away, and with President Trump scheduled to deliver a speech to Congress on Tuesday night, there will be plenty of speculation about economic policy.
There is continued strength on Monday morning as European defense stocks rally on the likelihood that the European Union will serve as peacekeepers in Ukraine and also on an announcement by the Trump administration that it is expanding a crypto strategic reserve beyond Ethereum and Bitcoin to include other lesser-know cryptos. Bitcoin IBIT has jumped about 10% from the stock market close on Friday, which is giving a boost to speculative names.
The biggest market problem recently is the high level of uncertainty. There is no clarity about what will happen with tariffs, and there are growing signs of an economic slowdown. Interest rates have been falling as the odds of a recession are building.
A further complication is shifting leadership. The Magnificent Seven MAGS names have been in a downtrend since mid-December, and Nvidia NVDA failed to rally on a solid earnings report and increased guidance. The AI theme is no longer the magic market formula that it once was, but nothing is stepping up to take its place.
There have been some lumpy and bumpy signs of rotation, but the Russell 2000 (IWM) is back to the level it last hit in September, and there is no consistency in the action.
It is the first day of a new month, and that is unusual and positive as there are automatic inflows due to 401k plans and other contributions. However, it is very hard to trust the market right now with the tariff issue that is unfolding this week.
I’m prepared for market pressure as tariff news hits.
At the time of publication, Rev Shark had no positions in any securities mentioned.
