Coiled Spring Capital MW 4/2/25

Let’s be honest—this doesn’t feel like "Liberation Day." It feels more like being chained to the unpredictable swings of one man’s decisions. That said, the market caught a whiff of potential flexibility from the White House today, with reports suggesting that Musk could step down from DOGE as early as June. In our view, this would be a significant positive, signaling that the Trump administration’s radical chainsaw approach—one that’s been bulldozing economic confidence—might finally be softening.

While this remains speculation from Politico, another potential shake-up could be Howard Lutnick’s exit, something they’ve also recently theorized. Lutnick has been a vocal advocate for Trump’s aggressive tariff stance—a strategy that appears to be backfiring as macro data grinds to a halt, looking downright recessionary. If Lutnick were to step aside, it could signal a shift toward a more conciliatory trade policy—exactly the kind of pivot we’ve said could ignite a stock market surge.

Of course, we can’t trade or invest on hypotheticals. But if Musk is being nudged out, it’s at least a step toward proving that Trump isn’t entirely inflexible on key economic issues. Any move away from the more extreme policies weighing on U.S. growth would likely be welcomed by corporate management teams and could set the stage for a powerful stock market rally.

Our stance remains that the latter half of the year could see economic reacceleration—if businesses gain the confidence that the path ahead is stable and not overly restrictive.

It’s no coincidence that the SPX rallied straight to the July high pivot just before the Rose Garden presentation. As we’ve noted before, this is a key level—representing the July highs before the August Nikkei market crash and the subsequent September breakout that propelled the market to new all-time highs. It also aligns with Monday’s red gap window. The bottom line? This is a critical level to reclaim.

In our 3/30 report, we exited our tactical long position after the failed test of the 200-day MA. At the time, we flagged that the technical picture wasn’t supportive of being overexposed heading into today’s binary event.

Now, the question remains—are we actually on the verge of liberation? Or just waiting for the next unpredictable twist?

Our cautious stance heading into the event proved to be the right call. After an initial after-hours rally on the press conference sound bites, markets quickly reversed as President Trump announced sweeping reciprocal tariffs on all countries. While the specifics varied by nation, the overall takeaway was that the measures were far more punitive than Wall Street had expected. As a result, the after-hours market plunged, erasing gains and sinking below 3/31 lows.

We expected the tariffs to be punitive, but the real question now is how other countries will respond. Will they concede, or will they retaliate? At this stage, it’s impossible to know, though we suspect many nations will have little choice but to engage with the U.S. on new terms. With tariffs set to take effect by April 9th, the rest of the world has just one week to negotiate. Buckle up—more volatility is likely ahead.

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