Original Author: The Kobeissi Letter
Original Translation: TechFlow
U.S. stock market futures fell again today, with S&P 500 index futures dropping by -22%, officially entering bear market territory.
Over the past 32 trading days, the U.S. stock market has evaporated an average of $40 billion in market value daily.
Is it time to "buy the dips" on stocks now?
Just 32 trading days ago, the S&P 500 index hit a historic high of 6,147 points.
In the timeline below, we will explain how the S&P 500 has evaporated over 1,300 points in 32 trading days.
This is similar to the crash in March 2020, with market sentiment reaching one of the most pessimistic levels in history.
Key Time Points:
12 PM Eastern Time: Crypto market begins to decline.
5 PM: Decline accelerates sharply, with market value evaporating around $200 billion. We view this as a clear signal of risk aversion trading intensifying again.
6 PM: U.S. futures market opens down 6%.
So, what has changed since Friday?
More accurately, what has "not" changed - President Trump doubled down on his trade war stance.
Before Friday's close, investors still hoped for signs of a trade agreement over the weekend.
However, the result was complete silence, and the market is extremely dissatisfied with this.
President Trump just responded to the stock market crash:
The S&P 500 is expected to drop 15% in 3 days, one of the largest three-day declines in modern history.
His response was: "Sometimes you have to take medicine."
In other words, short-term pain for long-term gains.
The latest market sentiment survey (AAII Sentiment Survey) further reveals pessimistic sentiment:
Only 21.8% of investors are optimistic.
61.9% of investors are pessimistic, the third-highest reading in history.
Only March 2009 and October 1990 had higher pessimistic sentiment.
It's worth noting that most of these survey results were collected before April 2nd
Today's Market Observation: Panic Sentiment Soars, Market Enters Extreme State
Today, the Volatility Index futures ($VIX) surged above the August 2024 peak.
We have been shorting the S&P 500 index for weeks and previously called the S&P 500 decline an "orderly pullback".
But now, this decline no longer seems orderly, with panic sentiment reaching extreme levels.
The market may be about to bottom out and rebound.
A Significant Bottom Signal?
Even safe-haven assets like gold are experiencing sharp sell-offs.
Before Friday, gold rose significantly due to tariff uncertainty.
But today, gold prices have fallen below $3,000 per ounce, indicating investors are accelerating their market exit.
Panic sentiment is intensifying again.
On Friday, between 9:30 AM and 12:00 PM Eastern Time, retail investors sold $1.5 billion worth of stocks.
This is the largest sell-off record within 2.5 hours in history.
Since 2022, retail investors have consistently bought the dips, but this trend seems to be rapidly reversing.
The combination of institutional capital's massive withdrawal and large cash transfers to the sidelines further exacerbated the market's sharp decline.
March 2025 marks the most intense rotation of institutional capital out of U.S. stocks in recent years.
Now, retail investors have also joined the sell-off, accelerating the market's downward trend.
Market Has Digested Massive Negative News
During the recent 15% decline of the S&P 500 index, we have not seen any "relief rallies".
Any short-term news about reaching a trade agreement with major trading partners or delaying tariffs could trigger a rebound of over 5%.
The balance of risk and reward is changing.
Summary of Current Market Situation:
S&P 500 index has been falling straight down in 32 trading days;
Crypto market also joined the sell-off after a stable week;
Gold plummeted as investors rushed to exit;
Volatility Index ($VIX) broke through the August 2024 high point;
Both retail and institutional capital are withdrawing;
Market has priced in a lot of negative news.
While this is not a prediction of a long-term bottom, we emphasize that the market needs a relief rally.
Even the most brutal bear markets will see rebounds of over 5%.
A "healthy" bear market needs relief rallies to maintain market rhythm.
We have been shorting the market for weeks, but now this has become an overly crowded trading strategy.
Current market sentiment is polarized, with panic sentiment approaching March 2020 levels, which means more volatility is ahead.
Our subscribers are taking advantage of these fluctuations to generate profits.
Ultimately, it all comes down to one core question: Will Trump's tariff policy persist long-term?
If the answer is yes, the U.S. will inevitably face a severe economic recession.
If the answer is no, then the current market represents a historic buying opportunity.
Follow us @KobeissiLetter for real-time analysis and to track developments!
