Yes, That Counts

With false rumors swirling all day today about alleged pauses and delays in tariffs, we saw the S&P 500 Index surge earlier from 4,826 up to 5,246 in a matter of moments.

First and foremost, that sort of violence (hard and fast price swings, intraday moves) is far more characteristic of a bear than a bull market, overall. The reason being Bear markets are essentially discombobulated as to how to properly value equities, or anything remotely close to it given the macro backdrop and valuation. Hence, we get the herky-jerky swings which do not seem to amount to much when the dust settles, at best, or even worse yet set up the next leg to new lows with a new batch of trapped longs. 

Beyond that, unless this is the exact bottom, and unless we remain in a bull market, overall, then rallying over 400 handles on the S&P in a few minutes still counts as a relief rally. I recognize this seems rather obvious, but you would be shocked as to how many bulls gloss over this notion. In their minds, it does count as a "real" rally, as they expect a larger and more durable ones. 

However, in a bearish regime these sharp rallies which cover a ton of ground, percentage-wise, serve to quickly squeeze out shorts leaning too heavily and suck in a new batch of bottom-calling longs. So, yes, these rallies do indeed count even if they do not last as long as one would like. Ultimately, the message of this market continues to be one of extreme uncertainty and indecision as technical deterioration persists across the major indices, sectors, and prior leading stocks. 

Finally, it is worth nothing that for all the focus on tariffs we could easily be looking at a mechanical degrossing of risk by over-leveraged institutions, all the while retail is buying the dip. The setup is there for a further washout as institutions continue to use retail for "exit liquidity" as the former de-levers and the latter remains complacent. Real that the 1987 crash, for example, was not accompanied by a recession or depression--It was almost exclusively a market event.