Probabilities favor "V-shaped" recovery for equities, despite murky tariff visbility. 5th confirming signal triggered 4/25 Array ( [cookie] => a6ec3e-dee21b-d31038-62a433-8838bd [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 212651 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: Friday close above 5,491 for S&P 500 is the 5th confirming signal of a low and odds favor a V-shaped recovery led by washed out stocks like TSLA 4.32%  NVDA 0.59%  MSTR 4.81% .

Please click below to view our Macro Minute (duration: 5:26).

The risk/reward for stocks has shifted meaningfully positive over the past week. As we noted last week, we believe probabilities favor a V-shaped recovery in equities, as we got the 5th confirming “bottom signal” on 4/25 — the S&P 500 closed above 5,491 which is a 50% retrace of the decline from 2/18 to 4/7 (using intraday pricing). Over the weekend, the incoming developments were mostly positive, the two biggest being (i) Bessent tweeting about tariff deal progress (and reiterating White House “put”) and (ii) bigbox Costco, Walmart and Target instructing Chinese suppliers to resume shipments (presumes tariff terms improve by time ships reach US shores). Thus, buying the dips regime has returned:

• As we look at the week ahead, here is our framework for the week:
  – Bessent spent last few days tweeting progress on tariff deals
  – Peter Navarro has not tweeted since April 18th = good
  – “Blank sailings” means next focus will be empty shelves in coming weeks
  – but these risks seem “overstated” as WMT -0.06%  TGT 0.48%  COST -0.78%  resume shipments
• According to some media reports (ie, Gasparino, NYPost), the White House would like to roll out trade deals this week. These would not be finalized but a broad concept. To us, this is a restoration of visibility, particularly if a timeline is included, and would “unfreeze” the economy. This is a big deal.
• As for the blank sailings, we think this is worth watching as a risk. But this has been so widely discussed, that it would make sense that some of the downside risks from this as already socialized. Moreover, the fact that Costco, Walmart and Target instructed their Chinese suppliers to resume shipments suggests they expect reduced tariffs by the time these ships reach the US shores. Thus, we see this as only short-term problems.
• In addition, there is some key April macro data reported this week:
  – March JOLTS: Tue 10am ET
  – 1Q25 GDP: Wed 8:30am ET
  – April ISM manufacturing: Thu 10am ET
  – April jobs report: Fri 8:30am ET
• As for earnings, this is the heaviest week, with 180 cos report (36% S&P 500)
  – companies get a “pass” on 2025 guidance
  – key large-cap earnings are: CDNS 1.75%  PYPL 0.44%  SPGI -0.84%  CAT 1.34%  GRMN 0.44%  MSFT 0.24%  META -0.44%  QCOM 4.53%  AMZN 1.49%  APPL MSTR 4.81%  PWR -1.57%  ETN -1.70%
  – key SMID-cap earnings are: CR 4.68%  SPOT -1.85%  CVLT 1.55%  ENVA 0.56%  LRN -2.91%  FLS -1.43%  WING 0.43%  TDOC 0.96%  SFM -1.89%  FTDR -1.28%  OSIS 0.58%  TWLO -0.25%  TEAM 0.32%  OSPN 0.12%  ZETA -1.94%  SKWD -3.25%  
• The macro calendar (as noted above) for this week:
  – 4/28 Mon 10:30 AM ET: Apr Dallas Fed Manuf. Activity Survey    -14e
  – 4/29 Tue 9:00 AM ET: Feb S&P CS home price 20-City MoM    0.30%e
  – 4/29 Tue 10:00 AM ET: Apr Conference Board Consumer Confidence    87e
  – 4/29 Tue 10:00 AM ET: Mar JOLTS Job Openings    7490ke
  – 4/30 Wed 8:30 AM ET: 1Q ECI QoQ    0.90%e
  – 4/30 Wed 8:30 AM ET: 1Q A GDP QoQ    0.3%e
  – 4/30 Wed 10:00 AM ET: Mar Core PCE MoM    0.08%e
  – 5/1 Thu 9:45 AM ET: Apr F S&P Global Manufacturing PMI   
  – 5/1 Thu 10:00 AM ET: Apr ISM Manufacturing PMI    48.0e
  – 5/2 Fri 8:30 AM ET: Apr Non-farm Payrolls    125ke
  – 5/2 Fri 10:00 AM ET: Mar F Durable Goods Orders MoM

• But quantitatively, we received 5 confirming signs of a bottom (5th triggered 4/25):
  – First, on 4/14: VIX surged to >50 and then closed below 31:
  – bottom in 2009 and 2020
  – Second, on 4/22: Two consecutive +90% advancer days,
  – 3 of 3 times previously confirmed low (3/12/09, 8/9/11 and 4/6/20)
  – Third, on 4/23: High-yield OaS recover 50% widening
  – confirms we are walking back from recession
  – Fourth, on 4/24: Zweig Breadth Thrust triggered
  – 11 previous signals, 100% win-ratio 1M, 6M and 12M later
  – Fifth, on 4/25: 50% retrace, S&P 500 closed above 5,491 <– 4/25 close 5,525 CLOSE!

• WHAT COULD GO WRONG? The other shoes to drop (worrying investors) are:
  – Tariff war turns into “Cold War”
  – Economic ripples from “shock” lead to global recession
  – Financial crisis ensues from rapid financial de-leveraging
  – Inflation expectations surge leading to “greed-flation” and Fed is forced to hike rates
  – S&P 500 EPS estimates fall >20% from here

BOTTOM LINE: Probabilities favor “V-shaped” recovery

Given the confirmation signals above, we believe the probabilities favor a V-shaped recovery (versus a W-shaped ala 2011). We realize this is counterintuitive given the lack of earnings visibility. But the likely reason is equities collapsed from 2/18 to 4/7, and this waterfall decline reset positioning and sentiment in a way to allow for a V-shaped recovery.

The bull market has proven itself intact. We have identified two lists of “wash out” stocks, both large-cap (22 names) and SMID-cap (27 names). We want to look at stocks which did not make a new low between April 1-April 8, even as the S&P 500 fell to new lows.

The large-cap criteria is as follows:

• Current Market Cap >$15 Billion
• Declined more than 30% before Feb 18th
• Didn’t make new closing low between April 1^st & April 8th
• Current price down more than 25% from 52W High

The large-cap “washed out” tickers are:

WBD -2.96% LULU -2.08% TSLA 4.32% DKNG 1.00% DG -0.15% DLTR -0.63% BF STZ -0.47% RKT -0.16% COIN 2.18% HOOD -2.04% HUM 1.03% UAL -0.87% LDOS -1.22% TEAM 0.32% HUBS -0.55% MSTR 4.81% CRM -0.64% NET -0.80% SMCI 3.56% EIX -8.20% VST -2.09%

The SMID-cap criteria is as follows:

• Current Market Cap <$15 Billion
• Declined more than 30% before Feb 18th
• Didn’t make new closing low between April 1st & April 8th
• Current price down more than 25% from 52W High
• Short interest Day to Cover Ratio >2

The SMID-cap “washed out” tickers are:

DJT 1.53% ROKU 0.76% AS 0.40% LCID 3.72% RIVN 3.07% LKQ 0.49% CROX 0.77% NCLH 0.63% WBA 0.71% CELH 4.19% SOFI -1.12% MKTX 0.46% COLB 0.38% GRAL 5.06% INSP 0.46% PRGO 0.04% CNXC -1.38% DAY -2.09% LUV 0.27% LYFT 0.19% CFLT 0.12% DT -1.44% ESTC -0.79% PCOR -0.49% LITE ALAB 2.04% AES -0.09%

_____________________________

45 SMID Granny Shot Ideas: We performed our quarterly rebalance on 2/18. Full stock list here -> Click here

______________________________

PS: if you are enjoying our service and its evidence-based approach, please leave us a positive 5-star review on Google reviews —> Click here.

Key incoming data April:

• 4/1 9:45 AM ET: Mar F S&P Global Manufacturing PMI Tame
• 4/1 10:00 AM ET: Mar ISM Manufacturing PMI Tame
• 4/1 10:00 AM ET: Feb JOLTS Job Openings Tame
• 4/2 10:00 AM ET: Feb F Durable Goods Orders MoM Tame
• 4/3 8:30 AM ET: Feb Trade Balance Tame
• 4/3 9:45 AM ET: Mar F S&P Global Services PMI Tame
• 4/3 10:00 AM ET: Mar ISM Services PMI Tame
• 4/4 8:30 AM ET: Mar Non-farm Payrolls Hot
• 4/7 9:00 AM ET: Mar F Manheim Used Vehicle Index Tame
• 4/8 6:00 AM ET: Mar Small Business Optimism Survey Tame
• 4/9 2:00 PM ET: Mar FOMC Meeting Minutes Mixed
• 4/10 8:30 AM ET: Mar Core CPI MoM Tame
• 4/11 8:30 AM ET: Mar Core PPI MoM Tame
• 4/11 10:00 AM ET: Apr P U. Mich. 1yr Inf Exp Hot
• 4/14 11:00 AM ET: Mar NYFed 1yr Inf Exp Mixed
• 4/15 8:30 AM ET: Apr Empire Manufacturing Survey Tame
• 4/16 8:30 AM ET: Mar Retail Sales Tame
• 4/16 10:00 AM ET: Apr NAHB Housing Market Index Tame
• 4/16 4:00 PM ET: Feb Net TIC Flows Tame
• 4/17 8:30 AM ET: Apr Philly Fed Business Outlook Tame
• 4/17 9:00 AM ET: Apr M Manheim Used Vehicle Index Mixed
• 4/23 9:45 AM ET: Apr P S&P Global Services PMI Tame
• 4/23 9:45 AM ET: Apr P S&P Global Manufacturing PMI Tame
• 4/23 10:00 AM ET: Mar New Home Sales Tame
• 4/23 2:00 PM ET: Apr Fed Releases Beige Book Mixed
• 4/24 8:30 AM ET: Mar P Durable Goods Orders MoM Hot
• 4/24 8:30 AM ET: Mar Chicago Fed Nat Activity Index Tame
• 4/24 10:00 AM ET: Mar Existing Home Sales Tame
• 4/25 10:00 AM ET: Apr F U. Mich. 1yr Inf Exp Mixed
• 4/28 10:30 AM ET: Apr Dallas Fed Manuf. Activity Survey
• 4/29 9:00 AM ET: Feb S&P CS home price 20-City MoM
• 4/29 10:00 AM ET: Apr Conference Board Consumer Confidence
• 4/29 10:00 AM ET: Mar JOLTS Job Openings
• 4/30 8:30 AM ET: 1Q A GDP QoQ
• 4/30 8:30 AM ET: 1Q ECI QoQ
• 4/30 10:00 AM ET: Mar Core PCE MoM

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: