In last Thursday's post, I discussed an important point: the market must first reset before it can restart. Has the market reset yet? From both a macro and micro perspective, it might still not be enough.
If, at that time, you also started shorting during the intraday session and added your positions during the overnight trading, you probably made close to 5% in intraday gains. While it may not seem like much, being able to make money in this kind of market is already a victory. What more could you want?
This week is crucial. The S&P 500 index has been hovering at its 50-week moving average for three weeks now, and this week will determine the outcome. $S&P 500(.SPX)$
There are two major events for the US stock market this week:
On Wednesday, Trump will announce global tariffs, and on Friday, the non-farm payroll data and Powell’s speech are scheduled.
Before Wednesday, Goldman Sachs had already sounded the alarm. According to Dow Jones News, in a recent report, Goldman Sachs raised the probability of the US economy entering a recession over the next 12 months from 20% to 35%, almost doubling its previous estimate.
This pessimistic outlook stems mainly from the Trump administration’s upcoming "reciprocal tariff" policy, set to be announced on April 2. Goldman Sachs expects this policy to impose an average 15% reciprocal tariff on all US trade partners, increasing the average US tariff rate by 15 percentage points, significantly higher than the previously predicted 10 percentage points.
The report also revised inflation expectations upward and GDP growth projections downward. It raised its core PCE price index forecast for the end of 2025 by 0.5 percentage points to 3.5%, lowered the GDP growth forecast by 0.5 percentage points to just 1.0% (year-over-year quarterly), and predicted the unemployment rate to rise to 4.5%.
As the economic outlook worsens, Goldman Sachs also expects the Federal Reserve to cut interest rates three times in 2025 – in July, September, and November – bringing the federal funds rate to a range of 3.50-3.75%. Previously, Goldman Sachs had forecasted no further rate cuts this year, with only one rate cut expected in 2026.
What’s more concerning is that Goldman Sachs predicts the US economy will weaken, consumer vulnerabilities will increase, and real income growth will be just 1.4% in 2025, well below recent levels.
The US non-farm payroll report for March will be released on April 4 (Friday), and the market expects 135,000 new jobs in March, a significant decline from the previous 151,000. Average hourly earnings are expected to increase by 3.9% year-on-year, slightly lower than the previous 4%, with month-on-month growth remaining at 0.3%. The unemployment rate is expected to remain unchanged at 4.1%.
On April 4 (Friday) at midnight, Fed Vice Chairman Jefferson will speak, followed by Fed Chairman Powell’s speech at 23:25.
With so much macro news this week, it's going to be difficult to trade during this time.
The market’s focus is now squarely on April 2 – the day the US may increase import tariffs. However, Bank of America strategist Michael Hartnett believes that “April 2” might be overhyped and that the real "turning point" will come with the release of the March non-farm payroll data on April 4.
You can also see this in the options market. According to options analysis service ORATS, the volatility pricing for S&P 500 index options expiring in the near term (including March 31 and April 4) is higher than for longer-term options.
Trump has a tendency to make a lot of noise, but in the end, the results are often less dramatic. This pattern is quite common.
Therefore, if global investors are excessively bearish on the April 2 tariff announcement, all rushing to buy safe-haven assets like gold, but the reality isn’t as severe, we could see a sharp reversal, with retail short positions getting squeezed.
There’s also a possibility that gold might be sold off at high levels.
Then, just when retail investors think all the bad news has been priced in, the Fed's meeting on Friday could bring a "double kill," where both long and short positions get trapped.
So this week, it’s better to lower your positions, sit tight, and watch. Trying to catch the bottom or shorting might result in being blown out of the market if the timing is wrong.
As retail investors, we need to have the mindset of retail investors: When we can’t predict the market's direction, we should reduce our positions and wait for the trend to become clearer.
Regardless of what institutions are saying, just watch the capital flow.
Focus on the trend at the 50-week moving average for SPX. If it breaks upward, we’ll follow it to go long; if it breaks downward, we’ll follow it to go short.
My strategy for this week:
US Stocks:
Keep a very low position in NASDAQ ETF (β), maintain at least 70% in cash, and use 20% for intraday trading.On Monday, Asian markets like Japan and Korea are already starting to fall sharply, so it’s better to stay cautious. If you're holding large positions, it's time to stop buying the dip.
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