Coiled Spring Capital MR 6/22/25

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Table of Contents

• Introduction

• Macro Updates

• Index Analysis

• Internals

• Crypto

• Conclusion

Introduction

The World Is a Dangerous Place

Unfortunately, this has been true since the dawn of civilization. The latest escalation in the Middle East is a sobering reminder of that reality. While global markets often appear insulated from the human toll of military conflict, history shows us that such events rarely follow a neat script. They tend to spiral, bringing increased casualties and unforeseen consequences.

We are not political commentators—and we have no intention of weighing in on what is or isn’t justified. But we can say unequivocally: we never support war. We’d much rather live in a world where diplomacy prevails.

As the U.S. becomes more involved in the Israel–Iran conflict, the range of opinions will grow louder. That’s not our domain. What we can speak to is how markets typically respond. And in situations as fluid as this—where a major global power launches military strikes—one thing is almost always true: volatility rises.

We’ve been writing for weeks that volatility was about to increase—not because of any geopolitical forecast, but because our DeMark analysis signaled it. In our 6/8 report, we noted that buy signals on the VIX and VVIX had historically preceded major volatility spikes. As of Friday, both measures were already up over 30%. That number is likely to rise even further once markets open Monday.

We reiterated this in our 6/15 report. Here’s what we said:

We’re also proud of our timely call to go long Oil in the 6/8 report, recognizing that technical stress was quietly building beneath the surface. As the most geopolitically sensitive macro instrument, crude tends to move ahead of headline risk—and it did just that. When markets open Sunday night, Oil will likely test the upper end of its January range. A move to $80 would mark a 25% gain in just two weeks since our initial long recommendation.

We’ve consistently warned that corrective action was likely following the widespread completion of DeMark sell signals across major market indexes. Corrections can unfold in either price or time—so far, we’ve seen the latter, with shallow dips quickly absorbed. That’s why our stance has remained to buy weakness, even if the dips have been more muted than expected. That dynamic may shift come Monday.

Importantly, readers of our work were well prepared. In our 6/8 report, we precisely highlighted 6060 on the SPX as a tactical level to trim risk. The index topped at 6059 before falling nearly 2%. That’s not luck—it’s disciplined analysis. Now, with markets pulling back, you’re in the enviable position of redeploying capital at more attractive levels.

Whether this pullback deepens into our preferred buy range will depend largely on how the geopolitical news cycle evolves this week. The setup is in place—now we let the market decide.

Given the fluid nature of the current geopolitical situation, it's impossible to say with precision whether tomorrow will mark a definitive “buy the dip” moment. However, history does offer valuable perspective. Markets often rebound once the initial shock of military conflict is absorbed.

There’s a well-known Wall Street adage: “Buy on the sound of cannons, sell on the sound of trumpets.” The wisdom behind this phrase is that moments of extreme fear—such as war or geopolitical crises—tend to offer compelling opportunities, as markets often overreact in the short term. Once uncertainty begins to fade, equities tend to stabilize and recover.

Below is a table detailing major modern U.S. military engagements, the immediate reaction of the S&P 500, and how long it took the market to recover. These events illustrate a key takeaway: fear-based drawdowns tend to be short-lived.

Below is a compilation graph using the above information:

Key Takeaways:

• Larger drawdowns have typically occurred when the conflict was a surprise and/or the macro backdrop was fragile — as seen with Pearl Harbor, Gulf War I, and 9/11.

• Recovery times have shortened in recent decades, particularly when market positioning was risk-on and geopolitical responses remained contained — such as during the 2020 Soleimani strike.

• Applying this lens to the current situation, it appears to align more closely with the latter category — risk-on positioning and a measured geopolitical response — based on what we know today.

That said, forecasting conflict outcomes is inherently difficult. Any unexpected escalation or fear of broader multinational involvement could change the narrative quickly and drive more significant market dislocation.

With that framework in place, let’s turn to the charts.

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