The Weekly Trend
The Weekly Trend
Episode 248: Falling Knives
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In this week’s episode, David and Ian discuss the strong selling pressure witnessed this week, correlations moving to one, the importance of having a process, and what, if any areas of the market are holding up while the main indices pull back.
Welcome back to the Weekly Trend Podcast. Today is Friday, April 4th, 2025 s and P 500, currently sitting at 51 92. I'm David Darling. I'm here with Mr. Reader Ian McMillan. Plenty to cover this week, but first I think it's great that you could be there for your son and. Read for the class.
ian_1_04-04-2025_115549Yeah, it was really cool. Kate got to do it earlier this year. Got to do it today, so that's always fun to get to surprise the kiddos,
david_1_04-04-2025_105549Core value number five. Life outside the Office. That's awesome. What'd you guys read about?
ian_1_04-04-2025_115549planet Earth.
david_1_04-04-2025_105549Okay. Excellent. Hey. Sometimes those things are, I shouldn't say sometimes, almost all the time, more important than what's going on in markets, but plenty to cover this week. For people listening, obviously the narrative backdrop is quote unquote, liberation day and tariffs, but we also have a market response, and it's easy to put two and two together and say those things are related. But quite a move this week.
ian_1_04-04-2025_115549Yeah, at least over the last two days. Last Friday we've gotten a little bit of a bounce, I guess still kind of down near lows. First few days this week we're fine. But never, never made it back above any important levels.
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549whether it was the 200 day or various anchored v WAPs the July 20, 24 Highs eyes. And then when, you know, we fell apart.
david_1_04-04-2025_105549Yeah, I mean it, it adds credence to the phrase, nothing good happens below a 200 day moving average, and here we sit. You know, it wasn't that long ago that we were testing the underside of a. 200 day moving average back at late March
ian_1_04-04-2025_115549Mm-hmm.
david_1_04-04-2025_105549and have since fallen since then, about 10, 11% using something like the s and p 500. And when you look at that dataset, when you look at the prior 200 days of information, which is what defines the 200 day moving average. The backside data, that's gonna be Dr. We're below the level of that backside data. So the data that's gonna start dropping off actually will cause this 200 day average to flatten out pretty dogg on quick. Here, we sit, you know, s and p 500. Currently at the levels we saw. In early August, 2024 after the brief July correction of last year, but it's the old adage up the escalator, down the elevator,
ian_1_04-04-2025_115549It certainly feels like that
david_1_04-04-2025_105549and just like that, quite a few months of gains wiped out.
ian_1_04-04-2025_115549about 10 months.
david_1_04-04-2025_105549Yep.
ian_1_04-04-2025_115549Going back to last May and we off, we had October, or we had the August 5th Japanese Asian debacle. But yeah, between from March through, what was that, mid-February 20% run, pretty strong run, right? We have the election in there. And those gains have been, were given back for a while. I would say that was kind of the first red flag. We're still above, kind of above a 200 day in there. I guess they were kind of lining up the, the Tuesday close. So election night closed before the gap. Yeah, gave that all back. That was, that's kind of another one of those big not a technical level, but a behavioral level for sure. cause we all remember that market reaction after the election. So now you sit there and say, wow, we gave all that back. Yeah. I think that, I think that definitely said something and we're seeing some follow through from that.
david_1_04-04-2025_105549Yeah, for sure. Well, and it, you know, those who practice. The artful science of technical analysis. It, it is interesting to watch price move up into levels that the base from 2022 through 2023 created, reached that target reverse clear at 200 day moving average. And then the penant we were talking about just a week or two ago the you know,'cause you have your initial move. From all time highs.
ian_1_04-04-2025_115549Yep.
david_1_04-04-2025_105549back in late February, you have a counter counter move into the 200 day from the underside, and now we've already reached target of that particular move and I, so the, the, the process then becomes right, because our clients are familiar, we're little to zero exposure to equities. Copious amounts of cash and t-bills and that's great. But from a, from a process standpoint, Ian markets are a future discounting mechanism. They're dictated by supply and demand. Obviously supply has control. What are some levels that you're looking at where you would say, Hey, it would be interesting if demand returned here to, cause the first thing that has to happen is price just has to stop going down. We haven't had that yet. Are there levels that you're looking at where you say, Hey, that's an area of interest, that's a place where buyers have showed up in the past or they, you know, we wanna pay attention to them? Or is there anything you're looking at in that regard?
ian_1_04-04-2025_115549I mean, I'd just kind of say where we're at this morning. The I dunno, 5,100 that's where we were on August 5th, so we'll see.
david_1_04-04-2025_105549Yeah. 5,100. Is the August 24 low? It's near the April 24 high from a volume profile analysis. We've had volume in here in the past, so it'd be interesting to see if we get some buyers here. But dare I say, if we're, if we're losing 5,100 or 4,000, that a number we talked about for what felt like a year is back on the table. 4,800.
ian_1_04-04-2025_115549That would be tough. That would be tough from a technical perspective. Definitely a it would be a bummer to give that all back. But markets are bummers sometimes.
david_1_04-04-2025_105549They are, that's why buy and Hope is not necessarily a great process. Right now we're in a situation of what we would describe a falling knife. So prices
ian_1_04-04-2025_115549I mean, we talk about the s and p being down, what? I don't know what, it's down 15%, 16%, but. I mean, how many stocks are down even before this week? Down over 20%.
david_1_04-04-2025_105549right. And now we're starting to see correlations go to one. You know, we talked before hopping on here that Europe was holding up just fine before even yesterday. And here we are today, and they're, they're selling those two. And so this is where you're starting to see
ian_1_04-04-2025_115549Selling gold.
david_1_04-04-2025_105549Yep. Things go
ian_1_04-04-2025_115549fine.
david_1_04-04-2025_105549directionally the same way. And that's when you see correlations go to one. Where we are in that move, I, I don't wanna sit here and say, oh, that means we're close to some type of bottom. I have no idea, but 50, 51 hundred's a good line in the sand. And there will be big bounces in here. I mean, you got a VIX at 43,
ian_1_04-04-2025_115549Well, even if we bought'em here, there's nothing. I mean, based on our process not doing anything,
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549and we won't know it's about until.
david_1_04-04-2025_105549A,
ian_1_04-04-2025_115549Yeah. Till maybe we get to all time highs, I guess.
david_1_04-04-2025_105549mm-hmm.
ian_1_04-04-2025_115549So I mean, it's the same with, you know, it's the same with Monday, Tuesday, Wednesday, sitting in cash or watching the market move higher while you're uninvolved. I don't really feel any emotional attachment to that. Just and the same on the last two days. There's no what's the best way to put this? It's just, it is just another, it is just another, a bat.
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549And we could, we could bottom here and the s and p stays flat and you know, then we're back in and. I mean, there's so many different scenarios of how things could play out and whether, you know, is it good for, you know, is it 200 day moving average, the best, Sometimes it is, sometimes it's not. But
david_1_04-04-2025_105549And it,
ian_1_04-04-2025_115549out for clients. I will
david_1_04-04-2025_105549yes, correct.
ian_1_04-04-2025_115549definitely. And they're allowed to be emotional. They're absolutely allowed to care. I mean, we care. We're not
david_1_04-04-2025_105549interesting.
ian_1_04-04-2025_115549now.
david_1_04-04-2025_105549Yeah. It, it's interesting that it, it, two things can be true at once. You're unemotional about it. But that doesn't mean you don't care.
ian_1_04-04-2025_115549Yeah.
david_1_04-04-2025_105549You have a process. You stick to the process. You have your rules, you stick to the rules. But that, you know. Most people like a market that goes up, right? That's a, that's an environment with a tailwind. That's an environment where you can grow accounts and there's a time to grow capital and there's a time to protect it. And we're in that protection mode. Those familiar listening to this would recall our episode back in late February that laid out the Bear's thesis. We click quickly wiped through some of those items, you know, clearing. The January low clearing below the January 1st price clearing below Election Day Clearing below a 200 day. And here we are lower 15% since that episode. So was that episode prescient? Sure. I mean, broken clock is right twice a day, but it's about analyzing the weight of evidence as a whole, and at that time. Things were fine until you saw credit spreads start to increase pretty rapidly. And when there's credit stress or liquidity stress, something's up. And now you have junk bonds. You know, kind of giving signaling days before yesterday that there might be more stress in the system than originally thought. You saw the yen, you saw treasuries, you saw gold all moving higher together. That typically is risk off. And here we're seeing the fruits of that. And then you highlighted, you highlighted last week, high beta stocks versus low ball stocks. And now we're all the way back at the 22 lows in that relationship. I mean, that's where the last bear market ended was. Summer, fall of 2022, and we're back at that level quickly for high beta stocks versus low vol.
ian_1_04-04-2025_115549I absolutely agree a lot. A lot, a lot of dead canaries. Coming into this week,
david_1_04-04-2025_105549Mm-hmm.
ian_1_04-04-2025_115549sometimes it means more trouble on the horizon. Like now sometimes, like, November, 2023 doesn't mean anything or it's short-lived. But like we've said many times on this podcast clients will know we've stated it. I mean, almost monthly for years that we don't know what's gonna happen. It's all about the process. I, and it's okay. okay to go below the 200 day and get back in. I think most clients are cool with that. But what we're not gonna do. Is just, well, November, 2023 was kind of a fake out, so, I think this one could be a fake out. We are not going to do that.
david_1_04-04-2025_105549Yeah, why? Why, why try to catch a falling knife? You never do that to your child. A knife falling and hey, quick grab it. No, just let it hit the floor. So we're in price discovery mode. We've got a falling knife in price. We need to find demand. We need to find where the buyers are willing to buy. See that established itself first before any, you know, substantial involvement can even begin. And so that's, that's just the current market environment. You know, people love predictions, you know, where, where is this market going? As Ian alluded to before, there's lots of different ways that this could play out. I mean, it's great to finally see a put call ratio over one. It's great to, you know, to see VIX in the forties. Typically, your one to five year returns once you see that are, are pretty good. But. The idea that I can sit here honestly on this episode and say, oh, the bottom is in. There's no way to know that at this point.
ian_1_04-04-2025_115549There's absolutely no way. I mean, this is really day one to your point of correlations, increasing
david_1_04-04-2025_105549Mm-hmm.
ian_1_04-04-2025_115549your Europe's, your golds had kind of hung in there. Now we've reached, oh my gosh, just get me out or feels like we're starting to get there. But that
david_1_04-04-2025_105549Yeah.
ian_1_04-04-2025_115549happened in October oh eight
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549and then we didn't bought'em for another five months, so.
david_1_04-04-2025_105549Yeah, and it's really interesting because, you know, leading into this moment you saw. A A I I survey information showing record bearishness. So tip your hat for their sentiment. You didn't see the positioning. And then lemme get your opinion on this. Ian. We have JP Morgan yesterday saying retail investors bought 4.7 billion in stock yesterday, which is the largest level over the past decade. I don't know when everybody's dip buying. Is that really when it ends?
ian_1_04-04-2025_115549Usually not. I mean, if I had to guess, I would say no.
david_1_04-04-2025_105549Right. And it won't be a straight line. I mean, this goes back to, I think a few episodes ago we talked about. Missing the best days in the market. You know, that's the old mantra of why you should buy and hold is'cause you're gonna miss the best days in the market, which completely excludes the, the data study process of the best days happen next to the worst days. So it is increasingly likely that in the weeks to come, your best days of 2025 are gonna start happening.
ian_1_04-04-2025_115549Mm-hmm.
david_1_04-04-2025_105549But that's also happening next to the worst days in 2025. So there will be,
ian_1_04-04-2025_115549mean, I think next week could be a great week.
david_1_04-04-2025_105549right.
ian_1_04-04-2025_115549we, I'm sure, I mean, you know, VIX at 40, that works both ways.
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549big green days with a elevated vix
david_1_04-04-2025_105549Mm-hmm.
ian_1_04-04-2025_115549weather that. You know is yeah, a bottom, a bottom, v bottom. I don't know.
david_1_04-04-2025_105549Yeah, and we're in rarefied air. I mean,, when you look at, you know, bespoke, put out some good information that today is just the fourth time. The s and p has gapped down over 1% for three days in a row.
ian_1_04-04-2025_115549Wow.
david_1_04-04-2025_105549Last time we saw that was Covid March 9th, 2020, and the great financial crisis September and December of 2008. So pretty historic, but that's what markets do. They con constantly are recording historic moments, but it is notable and also thankful. To have clients in cash, to be in protection mode and there will be a day this market firm's up, there will be a day when it, it turns back around. Maybe that day is today. What are the odds of that? I think slim, but who knows? I mean, I'm not here to tell what the market, what to do.'cause everybody's got an opinion, right? Everybody thinks the market's wrong. That's the exact opposite framework you should have as an investor. You should always assume that the market is right
ian_1_04-04-2025_115549Yes.
david_1_04-04-2025_105549and make sure that you're positioned accordingly and understand when you're wrong. And so here we sit in price discovery mode, trying to figure out where this, either the selling stops or the buying begins. Don't know that if that's here, 5100 4800. There's a scenario where we bounce for the rest of the month back into the 200 day and then over roll back over.
ian_1_04-04-2025_115549There's so many. I mean, and that's what is tough when these, gets itself in these stuck between a rock and a hard place. You could have a great rally over the next week, two, three weeks. You can rally six, 7%, 8% and not fix anything.
david_1_04-04-2025_105549I mean, to your point, just getting back up into a 200 day will take about a 10 to 11% move. It could happen, but that might not fix anything. So definitely damage done across a lot of different instruments. Europe included, you know, we had seen a lot of strength in Europe, some places in Asia, and those kind of gave way this week.
ian_1_04-04-2025_115549they did. China had been a holding up pretty well. I mean, did have a failed breakout, I guess a few weeks ago. Relatively, I guess, still holding up. Okay. But yeah, some, some damage done there for sure. Really? No one. What, wait, who? Is there anything you would say that it's actually held up well? Other than long term treasuries,
david_1_04-04-2025_105549Well, I'm,
ian_1_04-04-2025_115549I would say Bitcoin.
david_1_04-04-2025_105549I was, that's what I was just about to say. I'm I, Bitcoin versus s and p is really something to behold.'cause we're back above that relative neckline near 1516 in a, in a ratio, in, in talking, in ratios. So the fact that Bitcoin held up like this. Is you always want to pay attention in broad red tape. So when you're seeing this broad selling, the things that are holding up, you know, example of that would be s and P's. Currently down about four point half percent on the day. But here, Bitcoin's down minus 0.14. Okay. Maybe there's something there. Maybe there, you know. When it's ki it's kind of like pushing that beach ball underneath the water analogy that we've used before when that pressure releases. So when this downside pressure of selling, broadly speaking releases it, you do it. This scenario piques your interest on the possibilities for Bitcoin coming out of that cause Bitcoin's not up on an absolute basis today. The fact that it's holding up so well on this red tape.'cause I mean, we're, we're close to a 90% downside day to today, so 90% of issuance is down. That Bitcoin's, bitcoin's not doing that makes you wonder when the beach ball is released, if Bitcoin's gonna pop pretty aggressively out of here. How's,
ian_1_04-04-2025_115549agree.
david_1_04-04-2025_105549yeah, and I, I, what's also interesting is. Oil losing the 65 handle that had been setting up really nicely. And we sliced through that pretty aggressively and they've taken the more risk on areas of energy with it, you know, your oil services, things like that. They've really hammered'em. And so yeah, you might, you might be seeing lower prices at the pump here in the near future. Does that mean great things for the market? It might not good for your gas tank, maybe bad for your account if you're exposed to it.
ian_1_04-04-2025_115549God. Yeah. Never. Never the best sign to see that. To your point I mean, it is cool to pay less the pump. And we've been fine. I mean, crude going lower is fine. Have been in really in a range for a few years, like you said, little sweet. I'd put, I'd put copper in that same category,
david_1_04-04-2025_105549Yeah, copper had been setting up, had been setting up really nice.
ian_1_04-04-2025_115549And now just, I don't know, not the, not the best move.
david_1_04-04-2025_105549I mean, loss lost the all time highs. I mean, it had just had all time highs back in March using copper Futures and quickly sold that off. And again, you're seeing credit stress, you know, whether you're looking at Triple C credit spreads, where whether you're looking at something like junk bonds, which is intermediate bonds, there is credit stress out there. How about the dollar?
ian_1_04-04-2025_115549Yes, the dollar, the dollar getting continues, right? I mean, I guess dollar's been in a downtrend since January. We kind of, you know, got the bounce off of 1 0 6. Which is, you know, we were above this range, right? That 1 0 6, 1 0 7 was kind of the top end of this range. And then start, yeah, early March, broke that. Yeah, back to the low end.
david_1_04-04-2025_105549Well, I, you know, I think it's interesting noting how quickly things can change. Financials had been a relative leader, and here we have XLF down almost 9% on the week.
ian_1_04-04-2025_115549Yeah.
david_1_04-04-2025_105549I mean, when you start to see the leaders taken out, you know, I think the, some of the bigger developments too this week where when you look at the relationship of XLK technology versus s and p breaking important levels that had been in existence for quite a bit of time. You know, going back to. June of 23 we broke that neck line. You look at semiconductors using SMH versus s and p, breaking the neck line. That is existed since the beginning of 24. And then when you talk about semiconductors broadly using XXSD versus the s and p major, major breakdown and. That's breaking down from a range that's been in place since 2020. So five years. So five years of potential relative distribution of broad semiconductors is something to pay attention to. Now, is this some type of flush that we're experiencing? You know, we've talked about in the past few episodes wanting to see a flush. Is that that flush? And we move higher from here going forward? No idea. And we'll happily participate again if that's the case. If this is a flush and we move back higher and we're back above a 200 day and something like s and p would happily participate, now's not the time. What else are you looking at, Ian? What else peaks your interest or has you set up Taking notice?
ian_1_04-04-2025_115549I don't know. You mentioned home builders earlier. Home builders are green today. Bitcoin, it's really retail. Not terrible today. Definitely some, a little bit of intriguing stuff, but really, I mean, oh gosh, it's pretty bad across the board.
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549It is pretty bad. I know you mentioned earlier they kind of finally got to energy, which had held up well China Silver.
david_1_04-04-2025_105549Yeah, so silver had set up really well, and now they took it behind the woodshed. And again, that goes back to correlations are getting closer to one across the board. I. Anything to raise cash is being done. And so you have to pay attention to these different dynamics that sometimes there's no safe place.
ian_1_04-04-2025_115549Each, each chart on its own merit? Is that what you're saying?
david_1_04-04-2025_105549Yep. Each chart on its own merit and there's just a lot of broad selling today. Just.
ian_1_04-04-2025_115549your point, I mean, you know, I know that you had been involved for a while in communication services,
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549which had been holding up and great on a relative level. But the absolute chart down, right? So just because it looks better than all the rest doesn't mean you gotta keep it. It can still be ugly, you
david_1_04-04-2025_105549Yep.
ian_1_04-04-2025_115549take it on its own in a silo. The chart's still ugly. You don't need to own the prettiest, ugly chart.
david_1_04-04-2025_105549I like that. That's true. Sometimes cash is king. Not all marketing environments are the same, and that's why I have to highlight the supporter of this podcast, the Adaptive Select ETF listed on the New York Stock Exchange under ticker A DPV, which helps investors access two of the most prevalent factors in markets, momentum and relative strength using proprietary identification methods. The adaptive Select ETF attempts to own the strongest 25 large cap stocks when the market is in an uptrend. Since not all market environments are the same, adaptive select seeks to prevent extended declines by moving to short term treasury bills and cash during long-term market Downtrends investors can find out more including how to invest in AD PV by visiting a d PV etf.com or calling 1-833-880-FIVE 200. As always, investing involves risk, including possible loss of principle AD PVS distributed by Quasar Distributors LLC. So there you have a product which we're aware and can publicly speak, that it moved to t-bills in cash below s and p 500, 200 day cash is king. Cash is king. Sometimes again, it goes back to there's times to grow capital and there's times to protect, and the current environment is to protect regardless of the narrative. I get that there's a ton of narratives out there and. Immediate response might be how bad tariffs are. Who knows? 18 months from now we could be ripping higher to highs we've never seen before because of this tariff process. I have no idea.
ian_1_04-04-2025_115549Yeah, don't be surprised to see the market start pricing things in, know, positive things. Before the, before the media does.
david_1_04-04-2025_105549Mm-hmm. Yeah. Wet streets don't cause rain. Price moves first, then the narrative hits. And always have to keep an open mind on resolutions and outcomes. You know, that goes back to the sports analogy of you. You just can't assume pre-snap what's gonna happen on that play. You just wanna be aware of the options. And one of those options for the s and p 500 is that we bottom'em somewhere in here. We fi or, or we find demand near 5,100. Maybe 4,800 time will tell. I mean, all we can do is be patient statisticians, you know, taking in the most recent data and weighing it the most heavily. And here we ha have very strong evidence of selling in this market. No other way to say it. And until that storm subsides, we'll just park the ship in Harbor and, and wait it out. Anything else you want to add Ian Worth highlighting for our listeners before we ask them to share and give us great rankings.
ian_1_04-04-2025_115549No. I don't think that we're at the, by the dip place yet. I. Yeah, I, I just don't, I don't know. I, I don't, I think this goes back to my comment earlier about just being from a, from a technical perspective, just being non-emotional about it. I don't, know. We'll see. I am, I am mentally as prepared that we gap up 3% on Monday I am, that this continues lower,
david_1_04-04-2025_105549Yes.
ian_1_04-04-2025_115549and neither of them, like, neither of them matter.
david_1_04-04-2025_105549Right.
ian_1_04-04-2025_115549I'm not doing anything on Monday, so it doesn't, just doesn't affect me.
david_1_04-04-2025_105549You could have a face ripper of a move that doesn't fix anything. And yes, if you're in cash, that might feel terrible, but these things have to play out. You have to see a sustainable bottom established to prove that buyers have control of this market. And that's just not the case. Sellers have control of this market for sure. We're at a falling knife and you know, if you're buying stocks today, it's pure, it's 100% guess.
ian_1_04-04-2025_115549It is.
david_1_04-04-2025_105549And some might say, well, every time it's a guess. Yeah, but I Why?
ian_1_04-04-2025_115549there's better guesses than others.
david_1_04-04-2025_105549Yes. You know why step in front of a bus here. Let's just hang out on the sidewalk for a little bit. Let the bus clear. Then we can get involved. So, remains a risk off market. We're seeing some liquidity, stress sellers have control, and until that changes, we'll be on the sidelines. Our clients are familiar with that. We hope that everyone appreciates the information that we put out. You know, share it with your friends. Give us a high rating on your platform of choice. That's a compliment to us and we appreciate it. Otherwise, we'll be back next week.
ian_1_04-04-2025_115549Have a great weekend everyone.