Midnight Macro Note: Winning Wisdom, Quick Overview of the Damage, Employment Quick Stop, 'What's Next on K2' Tomorrow Evening

In this (delayed) Midnight Macro Note - we reflect on our winning wisdom in February & March, review the damage from March and April, and prep you for our note tomorrow 'What's Next on K2'...

Good Saturday night to all our MacroEdge readers and community,

This evening, we're taking a quick look back at the past week, focusing on the technical damage as we've seen our forecast from early March come to fruition in this initial impulse 1+2 move. We'll also revisit the insightful forecasts from our February notes and updates by the Vision Investment Research team. We've completed impulses 1 and 2, and now we're eyeing what's next on 'K2'—having descended quite swiftly over the recent weeks.

Back in mid to late February, I started discussing more frequently the explosive nature of market trends as participants increasingly ignored risk management principles. Financial institutions raised their S&P targets to staggering levels, retail investors became overly leveraged, and household investment allocations hovered (and still do) near record highs. While some of this data may be revised in the coming weeks, it's clear we've entered the initial 'shock and denial' phase, typically observed after the first two phases of an impulsive downward move.

No, the world isn't ending, and I do anticipate a market bounce in the coming weeks based on short-term technical conditions. However, I expect this rebound will not surpass the highs seen in February or December (depending on your benchmarks). Expectations, timing, and positions are two different things – and guessing or gambling on a short-term bounce are not something that I am particularly interested in doing. Below, we'll explore how our strategic framework has successfully navigated this more volatile market environment and talk about what lies ahead - in addition to going into the ‘K2’ discussion in much more depth tomorrow evening with our Vision team.

Reflecting on our Winning Wisdom from February

In February I increased the warnings we were releasing - particularly about the Nasdaq - as it struggled to break beyond the previous all-time highs from last January. A combination of factors: technicals, internals, and valuations - added fuel to the fire of that risk - and the uncertainty delivered by tariffs, along with other factors, have moved markets sharply lower in March and April. The Nasdaq Composite (^IXIC) along with single sectors like (SOX) semiconductors have actually given up entire advances from their 2021 highs.

You can read two notes: Standing on K2 and our 3/23 Weekly Macro Note for a broader discussion on what we mean by ‘K2’ - what the macro risks are to falling markets to the upper K - and how these might affect the economy in the months and years to come.

2/20 ‘Standing on K2’

3/23 ‘End of Quarter Discussion’:

‘4/2: Simply Kaizen’:

Now that we’ve descended a ways off of K2, you can read ‘Standing on K2’ for an assessment about the impact to our economy with the latest market moves. The reality is that a lot of the macro softness and economic concern will arrive in the fall & into 2026, and I think that risks will persist into 2027, especially if the tariff impacts are felt more broadly in the economy. We highlighted how fragile - many, many retail investors still need to be humbled, ready to buy the dip at the every move still and the broader macro risks have only amplified since our February notes.

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Employment Quick Stop