The Market Brief
Hey team! Stocks dropped in early trading as the US moved forward with tariffs on automakers, heightening concerns about an escalating trade war.
Let’s recap yesterday’s session and look ahead to what’s coming next!
Impact Snapshot
🟥 Core PCE Inflation - 8:30am
🟥 Consumer Sentiment - 10:00am
🟥 Inflation Expectations - 10:00am
Macro Viewpoint
U.S. stock index futures faced pressure on Friday as investors navigated the potential for additional tariffs from President Donald Trump, while also closely monitoring an important inflation report set to be released later in the day.
Range-bound session yesterday following Wednesday’s sell-off as the market digested the implications of the auto tariff announcement.
Post-open, the market moved sharply lower, and we saw some senior money monetize short-dated downside hedges in SPY. As the market slowly grinded higher, volatility continued to leak lower as we failed to realize.
We continue to see longer-term traders looking to hedge next week’s tariff announcements through April VIX calls and call spreads.
Prior Session Deep Dive
If you don’t understand what market environment you’re in, you shouldn’t be trading that market.
Sometimes, doing nothing is your superpower. Traders focus too much on what to do and expose themselves to unnecessary risk by trying to apply a strategy that is meant to work in different market conditions than the current ones.
Guess what? You need to adjust to the market. The market is not going to adjust to you.
The picture above includes some of the comments we shared during the overnight session with our subscribers, along with our marked references and key pivot.
You would have a hard time trying to pick any two different words than the ones we shared during the overnight to describe yesterday’s session, even a day after the fact.
Volatility and chop—an environment where short-term traders thrive and will constantly get the inventory too short and too long, driving an entire session into a volatile chop.
When senior money is sitting on the sidelines, (as we shared with recent flow evidence of the lack of open interest in U.S. exposure by institutions), you can’t really get any directional movements that leave meaningful support behind. Any directional move combined with low volume has high odds of seeing a correction, much like we saw on Wednesday.
“The session is controlled by short-term traders”
This quote is nothing more than an understanding of who you’re competing against during the session. It is simply a nuance to add to your narrative. You can expect very little follow through when breaking through some of these obvious references such as a gap fill. This is because of lack of commitment of volume and momentum that short term traders typically can not provide.
On an environment of Short-term traders you will get:
Short-term references holding their weight.
The market looks for obvious destination targets (e.g., filling the gap).
Range-bound activity.
Lack of commitment and volume on directional moves.
Extremely emotional response to recent headlines.
Will easily get shaken out of their positions.
The possibility of a very wicked directional change for short covering or long liquidation at any moment is always present.
If you thought all you had to do to get prepared for the session ahead was to look at an economic calendar to see what “news” there is for the day and call it done, you’re in for a lot of trouble.
What we do here is provide a precise narrative shaped by the market’s inner workings, backed by data and flows coming straight from the S&T divisions of some of the biggest Wall Street investment banks.