PPT Watch: How Far Must the Market Fall Before the Rescue?

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The tone of the ES and NQ was set in stone late Thursday when President Trump suggested China pay a U.S. port tax of $1.5 million per shipment. But it doesn't end there. Monday's headlines included Trump criticizing Fed Chair Powell and dueling headlines that both the EU and Japan said they made no progress in U.S. trade talks. Maybe it's all part of the art of the deal, but the lack of progress on trade talks has pushed bond yields up, hit the dollar (Euro currency 116), and caused a flight to quality, pushing gold up to $3,442.00 and Bitcoin up to 88,785. It really seems like the dark clouds surrounding the stock market are getting darker.

I’ve always worried about a major stock market reversal tied to U.S. debt and yields, but the Trump tariffs have been killing the so-called bulletproof dollar. At its low, the ES was down 3.7% and the NQ down 3.9%. The big question now is: when will the PPT (Plunge Protection Team) come to the rescue? Down 20%, down 30%, or even 40%?

Aside from Trump’s tariff headlines, there’s also a nonstop global rebalancing that is ongoing. Bonds got totally destroyed, selling off down to 112.91, down 1.48% and with the gold move both are flashing warning lights.

There’s also growing uncertainty around potential shortages and what things will cost once tariffs kick in. I read about a small but profitable company that buys its product from China at $20.00 per unit. The owner said he doesn’t know how the company can stay in business when the product jumps to $50.00 and they sell it for $38.00. I’m sure many other companies will be in similar predicaments worldwide.

Will supply chains slow? Will there be product shortages? Will everything go up in price? I think the answer is yes.

Last year, I wrote about a buddy we call Bubble. He's been buying silver and gold for the last 15 years, and he’s been stocking up on dry food rations and bullets. I have to admit, I thought he was a bit touched, but now he looks like a genius. Not sure who he’s planning to use those bullets on, but he says he’s preparing for the worst.

Let’s face it—even if the ES and NQ stage a big rally, the odds still favor another dead cat bounce. Like I always say, no one knows what the S&P is going to do next, and it won’t do what everyone wants it to do when they want it.

So how is the S&P stacking up against the European indexes?

As of April 21, 2025 – ESM YTD Net Changes:

• ESM25 (S&P 500 E-mini Futures June 2025): Approximately -12.62%

• NQM25 (Nasdaq 100 E-mini Futures June 2025): Approximately -15.25%

• YMM25 (Dow Jones E-mini Futures June 2025): Approximately -10.28%

As of April 17 – Europe Close for Easter Holiday:

• FR4025 (CAC 40 June 2025): Approximately -1.29%

• EU50 (DAX 50 June 2025): Approximately +0.80%

• FTSE (FTSE 100 June 2025): Approximately -1.60%

Since 2008, the S&P has outperformed the CAC, DAX, and FTSE in 9 out of the last 16 years—2011, 2013, 2014, 2017, 2018, 2019, 2020, 2023, and 2024. Research suggests that since the 2008 credit crisis, the S&P 500 has gained more than the CAC 40, DAX, and FTSE 100 in 9 years, based on annual returns from 2009 to 2024.

This reflects the S&P 500's relative strength in certain years, especially during recovery periods and in down markets where it lost less.

Like I said yesterday, the ES isn’t going down all year. While I understand the current trend, I still think we’ll see a sizable bounce when the markets turn. That’s when the ES will outgain the CAC, DAX, and FTSE.