US Equities have remained in a fragile period of choppy consolidation lately, and despite SPX being up 5% from the 4/7 intra-day lows of 4835, it certainly doesn’t feel like stocks have been rising lately. There remains some evidence that 4/7 lows were, in fact, more extreme in creating some volume imbalances and a strong breadth push off the lows to add some credibility to April having created a bottom in stock indices. However, the two-steps forward, one step backward certainly doesn’t feel too comforting for market bulls given no relief in tariffs lately. Moreover, the split in US Dollar trajectory vs. Treasury yields seems to suggest some questioning of the US reserve currency status. I currently view the extreme pullback in VIX over the past couple of weeks and retreat in High Yield Option Adjusted Spread as being positives for risk assets. However, there needs to be some evidence sooner rather than later in Equity indices starting to turn higher, which might accompany a further retreat and/or negotiation on tariffs. Until then, trends and momentum are negative, but arguably in better shape than a couple of weeks ago. Going forward, SPX 5500, QQQ-466.43 and DJIA-40,661 remain key areas to exceed to have confidence in a rally.
As seen below, the gap down in SPX to kick off the new week certainly wasn’t comforting to the idea of a market bottom having been made two weeks ago. All 11 sectors fell on heavy downside breadth to retrace about 61% of the prior rally from 4/7 lows.
The positives at this point seem to revolve around three important points:
- The momentum and breadth on the recent retreat haven’t been as strong to the downside as they were on the upside, as positives in the last two weeks. While breadth was indeed quite negative today, it did improve slightly given the minor late day rally. As discussed, the huge increase in Advance/Decline activity and volume two weeks ago has not been overtaken by similar but negative action to the downside since markets most recently peaked last Monday, 4/14/25 from SPX levels just above 5459.
- VIX has fallen a sharp 43% from peaks seen back on 4/7. In my view, it’s doubtful that any further tariff news would emerge that would catch the market more off-guard than was seen two weeks ago. That appears to be a positive, meaning that the VIX likely has peaked. Additionally, high Yield OAS spread has also retreated sharply in recent days which is also a positive.
- A severe US dollar decline during risk asset meltdown is unusual, but it has generally been a tailwind for earnings.
As seen below, the S&P 500 will require a move back above the area that coincided with last Friday’s lows that were violated today. Thus, the two most important areas on the upside as resistance for SPX are 5220, followed by 5328 in the short run. Conversely, the area at 5089 lines up with an Equal-legs wave projection based on the start of the most recent decline from last Monday, 4/14 peaks. Thus, prices look to be close to make-or-break, and can’t afford to break 5025 without expecting a possible test of 4/7 lows. Despite the recent negatives, it’s still difficult to call for a complete retest and/or break of early April lows as being the base case scenario.
S&P 500 Index
TNX likely won’t spend much time pushing higher before rolling over to new monthly lows
Overall, a few important technical observations are worth making:
- The bounce off the lows likely could extend in a choppy fashion into May before reversing back lower. (Based on a combination of Elliott-wave and Cycles.)
- It’s unlikely that yields are headed back to April highs right away. Thus, a choppy move is underway which ultimately might see Yields peak at fractionally higher levels in the next few weeks before a move back lower.
- The negative correlation between US Dollar and US Treasury yields lately won’t likely last too long. It’s expected that Yields likely should peak within a month and turn back down to join the US Dollar at new lows for the year. However, at present this negative correlation might grow a bit more pronounced given the trajectory of US Treasury yields.
US Government Bonds 10 YR Yield
Junk Spreads seem to have followed VIX sharply lower over the last couple of weeks, which is comforting
Both the High Yield Option Adjusted Spread (OAS) and the ratio of Investment Grade Corporates to High Yield Corporates have retreated sharply in the last two weeks to mirror the decline in VIX. This seems comforting to risk assets, as it should keep credit risk contained.
Additionally, Bloomberg reported that the leveraged loan market also seemed to be thawing lately given the $4 billion loan-and-bond deal to help finance QXO’s acquisition of Beacon Roofing Supply, led by Morgan Stanley and Goldman Sachs. This followed an offering by Venture Global Plaquemines LNG, LLC.
Overall, it seems like the retreat in Junk spreads, and VIX, coupled with some activity in the high yield market, is certainly helpful, despite Monday’s (4/21/25) decline. Last Monday’s rally in Junk bonds proved to be the biggest in 16 months.
As seen below, the retreat in this ratio spread following the move to test resistance looked fairly powerful as it rapidly gave back over 40% of the move, which had been rising since January.
Safe havens like the Swiss Franc and the Japanese Yen are approaching key levels
If our recent pullback in US Stocks is resulting in some of the popular “safe haven” trades gaining steam, then it should be important to watch carefully if/when these start to hit good levels of support.
With regards to the Yen, price on USD/JPY has nearly reached the lows from late last year, just above 139, which were initially thought to be important.
This prior low from last September occurred at 139.581, and should be challenged in the days ahead. However, the Yen seems close to having reached an upside target, and DeMark indicators have just flashed the first TD Sequential “13 Countdown signal” on weekly charts since the decline began most recently in January, 2025.
Importantly, it will take another 4-5 weeks before both a TD Weekly Buy Setup and a TD Combo weekly signal are possible. Thus, I don’t expect an imminent Yen reversal just yet. Moreover, I feel that a break from last September’s lows is likely by a small amount, given the recent momentum, before this begins a larger reversal.
At present, the risk/reward for longs in the Japanese Yen is a bit less favorable technically than a month ago. However, there remains no concrete evidence that USD/JPY has reached its bottom just yet. The next month should provide more concrete signs which might accompany a bottom in Dollar/Yen.
U.S. Dollar/Japanese Yen (New Your Money Center)
TSLA pulls back to test important support ahead of Tuesday’s post-market earnings
TSLA has continued to struggle following its peak late last year, but it is approaching an important level and heading into earnings on Tuesday.
Technically, trends remain bearish, and momentum has become “less bad” given the stabilization near the lows, which has happened since March.
From a pure technical point of view, it’s going to be important for Support between $214-$217 to hold in the aftermath of Tuesday’s earnings.
It’s difficult to make a bottoming call for TSLA technically, but my cycle composite shows a much better 2nd half trajectory for the stock starting in June into early 2026.
In the best case scenario, the stock would begin to lift in late April and rally to $270-$290 before settling into May. Thereafter, a bottom should be possible, which can lift TSLA eventually back to new all-time highs.
Unfortunately, if $214 is broken, there looks to be little downside support until $182 near last August’s lows. (Note: this isn’t a technical projection, but merely an observation.)
In my view, the stock is an attractive intermediate-term risk/reward, but certainly still lies in a sharp downtrend and has not shown much evidence of turning up just yet. Movement back above $280 on a weekly close would constitute the first signs of this getting underway. While I remain intermediate-term optimistic, I’m certainly cognizant of the current trend, technical structure, and the lack of movement off the lows in a meaningful fashion thus far. In times like these, it’s important to be patient until the stock can demonstrate some technical strength vs. attempting to pick lows. If/when this starts to strengthen meaningfully, I’m happy to give this some additional exposure in my research and fine-tune upside projections.
Tesla, Inc.
