Deep Dive Update for Monday April 7, 2025

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In this weekly deep dive update, prepared for Monday, April 7th, 2025, we analyze various charts to provide insights into the current state of the stock market. The markets have been experiencing a significant downturn, particularly on Thursday and Friday, despite being up earlier in the week. This decline was triggered by tariff-related news, leading to a severe drop in the S&P 500, with actual selling and money being taken out of the market on Friday.
The VIX, a measure of market volatility, is rising but the long-term trend remains below 20 using a 50-period moving average. The VIX's correlation with the S&P 500 spiked briefly but returned to normal levels. The ratio of the VIX to the VVIX (volatility of the VIX) has been increasing since mid-February, indicating a more negative outlook as the market has been declining. The skew index, which uses out-of-the-money options, has dropped below the red area, suggesting no conviction among investors about the market's direction.
The ratio of the VIX to the MOVE index (bond volatility) shows stocks are more volatile than bonds recently, with money flowing from stocks to bonds. The large cap growth ETF, a significant market component, fell over 6% on Friday and is declining, with the 50-period moving average crossing below the 100, signaling a negative intermediate-term trend. The ratio of large caps to small caps indicates small caps are underperforming more severely.
Despite the pullbacks, the market remains up 45.2% from the October 2022 low and 23.64% from the October 2023 low, though gains are eroding. Technical alerts were heavily triggered on Thursday and Friday, confirming the negative trend. Among the six indexes ranked from 0 to 100, the Dow holds up best at 40, followed by the S&P 500 at 26.5, with small caps weakest at 9.9.
The short-term and intermediate-term trends are negative, as shown by rainbow charts and other indicators such as the Landry Lite and Proper Order. The market is 11.91% below the 200-day moving average, and a potential long-term trend shift is being monitored. The Ichimoku cloud and other broad market measures, such as the VIXIN for the NASDAQ 100, reinforce the negative outlook.
Globally, the German DAX had been outperforming the S&P 500 in 2025 but also declined on Friday. Bonds suggest a deflationary environment, with ratios involving TIPS and other bonds dropping, indicating no immediate inflation concerns despite fears. The financial sector and regional banks showed some resilience, closing off their lows on Friday.
The market is oversold, with some indicators suggesting a possible bounce may happen soon, particularly in mid and small caps, though the quality of any recovery remains uncertain—potentially a dead cat bounce or a return of strength.

PDF of Charts and Slides used in today's video:
https://drive.google.com/file/d/1-D6MQXfqz9mMkyfTdxpAL9dkuS2imt8X/view?usp=sharing

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DISCLAIMER This video is for entertainment purposes only. I am not a financial adviser, and you should do your own research and go through your own thought process before investing in a position. Trading is risky!