APRIL BOUNCE

Market sentiment can't get much worse without a true economic surprise. I expect THE BOTTOM to be established in April as Tariff uncertainty peaks.

Bearish Sentiment

Fear and Greed Index

Positioning is reaching previous support

Active Fund Manager Positioning

SPX

Watching for

• Advance decline to put in a higher low
• Anchored VWAP support
• Oversold Bounce
  

Rate cuts in JUNE?

Two things can trigger the Fed to cut rates. The best-case scenario would be inflation surprising to the downside. The Fed is focused on "Core" inflation because it offers a more stable view of prices by stripping out food and energy, which can be very volatile from month to month, resulting in distortions of the trend.

Core CPI gives more weight to housing costs, like rent and home prices, while Core PCE emphasizes healthcare spending, including insurance and services.

Core CPI (housing heavy) has improved a lot more than Core PCE (healthcare heavy) over the past 6 months.

If we add back food and energy prices, inflation rates look even better.

It doesn't look like inflation will trigger the Fed anytime soon, but if tariffs turn out to be transitory, we could see a huge drop in inflation by May and rate cuts in June.

Remember, the Fed's focus is on the Core PCE and Core CPI, which means any positive surprises will result in market optimism.

Employment

The Next Data point that triggers the Fed will be an unexpected weakening in the labor market.

Non-farm payrolls are expected to be around 128k jobs. Anything lower will get the Feds' attention. However, unless payrolls turn negative, the Fed will want to see more weakness.

The Unemployment Rate is expected to be 4.2%. Anything above that gets the Fed interested. However, 4.3 is still below the long-run average of about 4.5%.

I still think it's too early for employment to turn significantly negative, but it's important to see how the market reacts to this report on April 4th. We still don't know if the market sees good news as bad news or bad news as good news.

For example, if the market rips higher following weak data, we can assume it's pricing in early cuts.

If it sells off on weak data, we can assume the market has decided the Fed has made a policy mistake by not cutting earlier.

Keep your eye on PMI's They need to stay above 50