👏Applause Above, Trouble Below: The Market's Hidden Risks

A very nice week for us — we monetized winners in UBER, HOOD, MSTR, CELH, META and AMZN. RDDT and COST are sitting pretty. Reddit - I love the stock and the chart, but with earnings approaching, I think it's time to take the win.  At $90, it’s a happy hold. At $120... let’s ring the bell. I'm still long quite a bit of stock. I also sold NFLX calls to lock in $1030 - a 50% win on the LEAPs I bought in the LEAPs Trader portfolio.

I've been mentioning on various shows that we’ll continue to see an unwind of extreme bearishness — levels we haven't witnessed since the Global Financial Crisis (GFC):

• Daily S&P 500 ranges at GFC extremes

• AAII sentiment readings that were at covid lows

• Even Trump has flinched a few times — suggesting less of a "bull in a China shop" approach

  
  

It feels like the "drive the global economy off a cliff" scenario may finally be coming off the table —especially considering how bleak things looked with 145% U.S. tariffs and China basically refusing to engage. Things were looking dire, or at least the sense of dread was palpable... and now? Not nearly as much. The bond "put" has spoken, and the Trump team backpedal happened.

That said, damage is still being done - it's real and not going unnoticed by certain measures. My risk gauges, even outside of the MTI, are at VERY elevated levels.

• The 10 year-yield is still showing stress.

• The VIX futures curve is still very much stressed even after a 600-700 point rally.

• The US dollar hasn't exactly soared on better sentiment and Trump flinches...

• Credit spreads have widened and yield vol is still high.

Economically, things haven't been super bad because of pull-forward purchases ahead of tariff implementation. Folks are in buy-buy mode to beat the price hikes. But at some point reality will catch up to a market that is near to being priced for perfection on any further rally.

Downward earnings revisions are just starting to pick up:

Employee sentiment is shaky, with real concern building:

Consumers at the margin aren't catching a break either:

I won't belabor the point — because a few well-placed tweets could shift the mood quickly, but the durable economic damage is not to be ignored, and it will get worse without some quick pivoting and tariff dealmaking.

For now the rally has happened, but things are les-than clear. The White House says negotiations with China are happening. China says… not so much.

With stocks trading around 5500, this market is actually close to fully valued. Can it go higher? Sure, bears may scramble some more.

We’ll be looking for new trades this week — but caution is still warranted. I'm trimming positions and collaring names I like.

Have a great weekend,

Hans