Coiled Spring Capital MW 4/23/25

Welcome, newly minted bulls and trapped bears, to Reversal Island. Of course, Reversal Island is metaphorical—what we’re really referring to is the flurry of island reversal patterns scattered across the market following a trifecta of positive headlines: Trump struck a more conciliatory tone on trade, walked back his threats to fire Powell, and even Musk stepped back from his DOGE duties to rescue his flailing company.

Each of these developments had been sowing doubt, dislocation, and credibility concerns across global markets. But last night’s shift in tone changed that dynamic—and nowhere is that more evident than in the US dollar. The world responded swiftly and clearly: it’s been selling the U.S.

Last week’s DXY bear flag breakdown may have rattled nerves inside the White House, prompting a sharp pivot from the prior hardline stance. Since then, the DXY has not only stabilized but reclaimed the key 8-day EMA, a vital momentum gauge. For any counter-trend bounce in equities to gain traction, a steady dollar is essential. So far—mission accomplished.

To underscore just how sharp the move in the dollar has been: the DXY’s z-score has only been lower three times in the past six years—twice during the Covid crash and once during Japan’s market dislocation in August. The message here is clear: when the reserve currency sneezes, global markets catch a cold—but this time, it’s taken a deep breath.

Of course, the messaging out of the White House remains as erratic as ever. After markets began to celebrate a potential thaw in trade tensions, Bessent promptly threw cold water on any optimism by walking back hopes for a timely deal with China. As a result, the indexes ended the day in a more precarious position than where we began—but notably, the gap-ups remain intact. More on that shortly.

The bottom line is this: when uncertainty reigns and news flow lacks consistency, price becomes the only truth. Attempting to forecast policy shifts, interpret conflicting soundbites, or lean too heavily on traditional fundamental analysis is a fool’s errand. Price, and price alone, stands firm.

Fortunately, our process continues to deliver alpha. Highlights from just the past week and a half:

• We anticipated a major countertrend rally just days before the April 9th tariff pause sparked a 10% surge in equities.

• We recommended a short in the VIX, which has since plunged over 50%.

• In our 4/20 report, we doubled down on our tradeable low thesis, encouraging tactical longs on extreme weakness. From Monday’s lows to Wednesday’s highs, the SPX rallied over 7%.

• We flagged a short-term top in gold in that same 4/20 report—gold has now dropped nearly 7%.

• We suggested adding Ethereum on the DeMark buy signal—it’s up over 14% since.

We hope you’ve taken advantage of the outsized returns—but let’s not get complacent. Volatility is still elevated, and the tariff situation remains fluid. That means more dislocations, more setups, and more opportunity in the days and weeks ahead.

Now, let’s get into the details.

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