The State of the Market After Wednesday’s Historic Face Ripper

These kinds of monster rallies tend to show up during bear markets — when volatility is elevated and emotions are running high – Alfonso DePablos, “A Day For The History Books”, April 9

Wednesday’s historic rally can best be described as a “face ripper”. In the middle of the trading session, President Trump put a 90 day pause on the huge tariffs he announced last Wednesday. The market catapulted higher in response with the S&P rallying 9.52% and the NASDAQ 12.16%, their third and second best days ever, respectively. I’m sure this looks like an “all clear” signal to many but in reality it isn’t.

For starters, we’ve only recovered about half of the losses since the Wednesday February 19 closing high. For another, as you can see in the chart above and as pointed out by Alfonso Depablos in the epigraph, these kinds of rallies tend to occur during bear markets. The other best days came during COVID (March 2020), the Dot Com Bust (2000-2002), the 2008 Great Recession and The Great Depression of the 1930s. All of these previous historic moves were false alarms; the worst was not yet past.

Further, the market was already in correction mode before “Liberation Day” (see for example “Bull Market In Jeopardy As Trump Trade Sours”, March 10, Top Gun Financial). Clearly there are other factors involved in the market downturn than the disastrous tariffs announced by Trump last Wednesday – and those remain in play.

If Trump can work out some deals with our trading partners over the next 90 days, that will be bullish. But despite Wednesday’s historic face ripper, the overall context suggests we are in a bear market.