Coiled Spring Capital MR 4/6/25

Table of Contents

• Introduction

• Index Analysis

• Macro Updates

• Internals

• Crypto

• Conclusion

Introduction

This past week in the stock market was one many would prefer to forget. After already enduring one of the fastest drawdowns in history, the now-infamous Rose Garden address—where the Trump administration threatened sweeping tariffs on over 60 countries—sparked another brutal leg lower. The S&P 500 dropped an additional 10.5%, and Friday marked the worst single-day decline since the depths of the Covid crash.

What makes this episode especially frustrating is that it’s entirely man-made. This isn’t a typical downturn tied to the business cycle—this is policy-driven chaos. Whether or not one agrees with the administration’s shock-and-awe strategy to recalibrate the global tariff landscape, the market’s reaction speaks volumes. Like a child holding their breath to get what they want, the market is suffocating under the weight of deepening uncertainty.

There’s no model for this. No roadmap for how 60 countries will respond to reciprocal tariffs. No way to forecast the collateral damage or unintended consequences from such a brash and untested strategy. The market is reflecting that very reality as it freefalls without a parachute.

Howard Marks summed up the current moment perfectly on Friday:

We’ve said repeatedly that the market lacked valuation support and that forward SPX earnings estimates were too optimistic. That reality has now collided with collapsing confidence. An exogenous shock has rattled not just investors, but the management teams they bet on. Earnings season kicks off this week, and we expect a grim tone, with many companies likely to pull forward guidance entirely. Perhaps more worrying, the uncertainty will freeze growth plans and trigger retrenchment—last week’s temporary layoffs at Stellantis are likely a preview of what’s to come.

The key question for corporate America is this: How long will tariffs stay in place? That unknown has the power to paralyze decision-making, stall investment, and grind commerce to a halt—much like we saw during the early days of the pandemic. Business can adapt, whether that’s through onshoring or repositioning supply chains, but that takes time. The easiest and fastest fix? Trump cuts deals. Confidence stabilizes. Markets bottom. Healing begins.

Back in our 3/30 report, we officially pulled our tactical long call. That caution proved well-timed, as the SPX fell another 9% this past week, and the Nasdaq dropped 10%. We’ve been calling for a C-wave decline since February, and the speed and severity of this latest move have forced us to revise our downside targets several times in recent weeks.

As early as our 3/12 report, we flagged the possibility of the SPX falling to the 5100 region. We didn’t expect it to get there this quickly—but here we are.

Here’s an excerpt from that report:

While we continue to search for the level where a durable bottom can form, one key variable we've been highlighting since February still hasn't triggered. That condition remains unmet—but we’re getting close. More on that shortly.

The biggest challenge in calling a bottom here is the sheer uncertainty around global trade policy. The situation remains fluid, and the range of outcomes is incredibly wide. Tell us how and when trade tensions get resolved, and we’ll tell you where the market bottoms. Unfortunately, it doesn’t work that way—and that’s exactly why we do what we do.

Markets tend to bottom before the news gets better. That’s where price becomes our guide. Just as we warned back in February that the market was flashing caution signs in our 2/19 report, “Are Monsters Hiding Under Your Bed?”, we believe the turn higher will also show up in price before it’s obvious in headlines. Notably, the market peaked that same day—2/19.

To reinforce how we approached the breakdown as it unfolded, here’s a quick refresher from our 2/23 report, after we saw confirmation that things were starting to unravel:

Key Highlights from 2/23:

• “If the SPX fails at an all-time high test and reverses lower, we’ll adjust our stance accordingly.”

• “Failures at major breakouts—especially ones that happen swiftly and with force—should not be ignored.”

• “Does this mark the end of the bull market? Unlikely. But could we have topped for Q1? Absolutely.”

• “The technicals also suggest trouble. This has all the hallmarks of a double-top formation.”

Here is the excerpt:

Since that report, the SPX has confirmed the double top pattern and dropped 15.5%. To be clear, we weren’t projecting a decline of this magnitude—but the warning signs for meaningful downside were flashing red.

In moments like this, when markets are gripped by extreme uncertainty, technical levels often get steamrolled. Support zones that typically hold are torn through as investors rush for the exits in a panic—like a crowded theater with smoke in the air.

What we’re witnessing now is, effectively, a crash. And while that sounds dramatic, it’s also setting the stage for a potential turning point. The market’s rubber band has been stretched to an extreme. And when that happens, one of two things usually follows: it either snaps—or it snaps back.

So, what’s next? Break... or bounce?

Let’s turn to the charts.

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