The selloff was triggered by an announcement on Donald Trump’s Truth Social platform about imposing massive 100% retaliatory tariffs on China in response to controls on rare earth exports. However, by Sunday evening, it became clear that this was a miscommunication between President Xi and President Trump.
Since then, the tone has significantly softened, and it appears highly unlikely that the 100% additional tariff threat will materialize. If we learned anything from April’s tariff turmoil, it’s that maintaining a bearish stance when the news gets “less bad” is a great way to miss the rally and remain sidelined.
As seen in the video, we should remain open to the possibility of a lower high confirming a downtrend, but if that doesn’t occur, stay equally open to the continuation of the uptrend.
Lessons From the Selloff
While I would never call the recent S&P pullback a “wipeout,” cryptocurrency markets faced an even more severe drawdown, with many traders having their entire portfolios liquidated within minutes.
Total liquidations reached $19.21 billion, according to heat map data.
Some key reflections:
When engaging in financial markets, anything can happen. As Charlie Munger said, “You only need to get rich once.” Portfolio management differs drastically if you have nothing to lose versus everything to lose.
Not understanding leverage mechanics (portfolio margin, not instrument selection) is dangerous. Use leverage wisely.
Be resilient; market events can destroy as many opportunities as it creates. And most importantly: life goes on. Your neighbor three doors down hasn’t even noticed what happened.
Market Outlook and Analysis
SPY Weekly:
No major trend shifts yet, plenty of room for a higher low to form around key reference points at 638.
SPY Daily:
Expect wider ranges and rising volatility. A true daily trend change requires a lower high or a significantly lower low following Friday’s dip.
Market Internals: Bears dominated on Friday and Thursday’s failed breakout, making Monday’s follow-through crucial. Watch the AD line correlation—rebound risk remains real. Market Profile: Value shifted sharply lower as expected. The futures open Monday will be decisive, with key attention on M and D period single prints.
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