The Rally: A Look Under the Hood
On Friday, the S&P 500 jumped 1.5%, notching its ninth straight day of gains. That’s the longest winning streak since 2004.
The Dow and Nasdaq kept pace, and the Russell 2000 even outperformed with a 2.3% pop. This week alone erased nearly all the losses sparked by the U.S.-China tariff flare-up just a month ago.
So, what flipped the switch?
- A strong jobs report (+177,000 new hires) helped calm recession fears.
- Hints of trade de-escalation with China added a layer of optimism.
- Technical momentum kicked in, drawing in algos and sidelined money.
But one piece didn’t fit: consumer confidence dropped. Hard. So either the market is early to the recovery—or in complete denial.
The Trade War Just Got Real: U.S. Ports Are Empty
While Wall Street cheered on Friday, the real economy is shipping a different signal—literally. Trump’s sweeping “Liberation Day” tariffs have led to a 50% cancellation rate on China-bound shipments, and the Port of Los Angeles expects volumes to drop 35% year-over-year. That’s not a slowdown; that’s a supply chain gut punch.
According to Apollo Global, we’re looking at a timeline that could end in a recession by summer:
- Ports go quiet → truck traffic slows → shelves empty → layoffs hit → spending stalls.
Major retailers say they have 6 to 8 weeks of inventory left. And while some have agreed to eat Trump’s 145% tariffs, smaller businesses don’t have that cushion. Meanwhile, U.S. ag exports are getting crushed, with China buying more soybeans from Brazil in one month than ever before.
This is already hurting:
- Shipping and logistics stocks: ArcBest (-17% in April), Old Dominion (-7.4%), J.B. Hunt (-11.7%)
- Retailers: Amazon fell 3% in April; Target dropped 7.3%
- Consumer demand: The National Retail Federation expects import volumes to fall 20% in the second half of 2025
Even if deals are struck, the damage is done. This isn’t just a skirmish. It’s a full-blown trade contraction.
Echoes of 2008?
If this setup feels familiar, it should. Back in 2008, the S&P 500 staged multiple rallies of 8–12% during the crash. Each time, the bounce looked like a bottom… until it wasn’t. History tells us relief rallies can suck you in before ripping the floor out. The first one came after crossing back over the 50-day moving average and couldn’t get past the 200-day moving average.
Today’s market is showing some of the same signs:
- RSI on the S&P 500 is overbought
- Volume is rising, but so is volatility under the hood (0DTE options are back in force)
- Breadth is narrow, with big tech still carrying the load
Not to mention, we had a 15% relief rally, and we’re nearing the 200-day moving average, but we haven’t crossed over it yet. Look familiar? The big difference is that in 2008, the 50-day moving average was well below the 200-day moving average, where this could be a minor dip before heading higher.
What To Watch:
Tech and industrials may offer an opportunity if the trade clouds clear. But for now, staples and energy look like better hideouts. Logistics names (IYT) are avoid-at-all-cost territory until volume stabilizes.
Stock Of The Week: Sherwin-Williams Company (SHW)
The stock recently crossed above the 200-day moving average, and the 10-day simple moving average crossed back above the 30-day simple moving average. To be fair, that hasn’t happened that often in the last five years – only nine times, but it has moved higher over the next 50 days over 60% of the time. It has a strong seasonal pattern over the next 50 days or so, and you have a potential stock hitting two bullish scans simultaneously.
I started looking at a debit spread for the 20 JUNE expiration, but with 10-wide spreads and the cost of the options, I couldn’t see anything I liked. I then looked at the spreads and tried to identify an area of interest, which I see being around $340.
The put credit spread that hit the scan was this:
I don’t love how many days to expiration there are in this trade, and I don’t love that implied volatility is now less than historical volatility after earnings. That means the option prices are relatively cheap compared to historical values. That’s not the best time for a credit spread, so this is my stock to stalk this week. Maybe the option prices will increase on a down day, or maybe the debit spreads will look more attractive and allow us to double the investment. For now, I will sit and wait.
If you agree with the thesis of a bullish move in SHW over the next 50 days, what would your trade setup be? Let me know!
Final Word
Friday’s rally was no fluke. The tape is strong. But the macro tape—trade, supply chains, real economy—isn’t syncing up. This is a time to stay tactical. Ride the upside, but keep your risk hedged and your eyes on the exit. Just like 2008, markets can bounce before they break.
