Tariffs are on, tariffs are off—does anyone even know what’s happening anymore? It’s completely confusing and honestly impossible to keep up with. I stepped away for 30 minutes to take my daughter to the stationery store for some squishy things that are apparently all the rage among fifth graders, only to check my phone and see the S&P 500 go from flat to down 1.2%. This, after opening nearly 2% lower and then rallying back to flat.
If I really tried, I’m sure I could come up with some BS about the market hitting a technical level, but at this point, it just seems like pure confusion driving the action. Add in a negative gamma environment and CTAs as sellers, and it’s a recipe for volatility.
So far, this sell-off looks pretty nasty—almost like a classic diamond reversal pattern. If that’s the case, we could be headed all the way back to the August lows.
In the meantime, 10-year rates rose about nine bps yesterday. The first five bps were driven by Germany’s proposal to increase defense spending, which pushed rates higher globally. The second leg of the rally came after Commerce Secretary Lutnick mentioned that tariffs with Canada and Mexico could be lowered today. The 10-year was oversold anyway, with the RSI below 30 and the yield below the lower Bollinger Band, so it’s no surprise it’s bouncing.
Higher 10-year rates pushed the 10/2 spread higher, which had been moving sideways since early February. yesterday, it made its strongest attempt yet to break out, rising above the 10-day exponential moving average and firmly moving beyond the downtrend.
The dollar was crushed yesterday, and I’m curious to see if this trend continues. If the dollar keeps weakening, it will be a significant signal—especially if rates on the back end of the curve rise, which would point to stagflation concerns.