SPY, QQQ: The S&P 500 Bounce: Relief Rally or Head Fake?

The SPDR S&P 500 ETF Trust NYSEARCA: SPY is buying and selling down 5.19%, and the NASDAQ 100, as tracked by the Invesco QQQ NASDAQ: QQQ, is down 8.2% year-to-date (YTD) as of March 28, 2025. The markets tried a reduction rally that was rejected on the 200-day shifting common on the SPY. Quite a few components performed into the sentiment reversal, inflicting buyers to ponder whether or not the reduction rally is taking a pause or is an entire head pretend.

The computer and technology sector, tracked by the iShares U.S. Technology ETF NYSEARCA: IYW, has fallen into correction territory, down -11.8% YTD, additionally as of March 28, 2025. The 200-day moving average support levels have been rejected on each the SPY and QQQ.

Weak Financial Stories Underscoring the Recession Fears

The Convention Board’s Shopper Confidence Index fell by 7.2 factors in March to 92.9. That is the fourth month in a row that it has declined. Recall that in February, the index fell 7% to 98.3, which was the biggest drop since August 2021. March dropped even more durable than February’s studying.

The Expectations index dropped 9.6 factors to 65.2, the bottom stage in 12 years, far beneath the 80 threshold that signals a recession ahead. The report is taken from shoppers over 55 years outdated and, to a lesser extent, shoppers between 35 to 55 years outdated.

Convention Board Senior Economist Stephanie Guichard commented, “Shopper confidence declined for a fourth consecutive month in March, falling beneath the comparatively slim vary that had prevailed since 2022. Of the Index’s 5 parts, solely shoppers’ evaluation of current labor market circumstances improved barely. Views of present enterprise circumstances have weakened to shut to impartial.

Shoppers’ expectations had been particularly gloomy, with pessimism about future enterprise circumstances deepening and confidence about future employment prospects falling to a 12-year low.

In the meantime, shoppers’ optimism about future earnings—which had held up fairly strongly previously few months—largely vanished, suggesting worries in regards to the economic system and labor market have began to unfold into shoppers’ assessments of their private conditions.”

The Actual-Time Recession Indicator from the Atlantic Fed’s GDPNow Falls

The Federal Reserve Financial institution of Atlanta’s broadly adopted GDP Now model, which is a real-time estimate of GDP development, is forecasting the GDP will decline -2.8% after the auto tariffs had been introduced closing the week of March 28, 2025. If the prediction materializes within the unfavorable, then it could be the primary unfavorable GDP quarter since November 2022.

Nevertheless, Goldman Sachs rebuts the GDPNow forecast, noting that the surge in gold imports is distorting it. The Atlantic Fed acknowledged this and launched a „gold-adjusted“ model exhibiting a studying of -0.4%.

The SPY Rally Rejected on the 200-day Shifting Common

The preliminary sell-off on the SPY bounced off the ten% „correction stage .“That is marked by a ten% pullback from the highs, which is $551.91. The SPY fell just under there on March 13, 2025, and proceeded to rebound the next weeks, briefly surging via the 200-day shifting common to peak at $576.41 on March 26, earlier than rejecting and falling sharply within the following days as Trump introduced the 25% auto tariffs on all overseas vehicles and components would go into impact on April 2. Trump additionally known as April 2 “Liberation Day” when he would unveil particulars of reciprocal tariffs on overseas imports.

The rally was sharply rejected on the March 26 announcement. The ten% correction stage at $551.91 is the important thing help stage the SPY wants to carry. Ought to that stage break, the following most vital space can be the 20% pullback space at $490.58, the dreaded “bear market” stage.

A bear market happens when the markets pull again 20% or extra off their highs for 60 days or longer.

It’s additionally a possible recession set off, so buyers ought to be keenly conscious of this value stage ought to it check or break. At that time, it’s additionally vital to be looking out for a Death Cross, which happens when the 50-day shifting common crosses beneath the 200-day shifting common. Whereas not all Demise Crosses lead to a recession, recessions can happen after a Demise Cross kinds within the following months.

The QQQ is Mirroring the SPY because it Additionally Rejected the 200 Day Shifting Common

The QQQ initially fell below its 200-day shifting common and collapsed via its 10% correction stage at $486.73. The cliché, „The larger they’re, the more durable they fall,“ holds because the collapse below the 200-day shifting common did not cease on the 10% correction stage.

Invesco QQQ At the moment

$472.70 +3.78 (+0.81%)

As of 04/1/2025 04:00 PM Jap

52-Week Vary

$413.07

▼

$540.81

Dividend Yield

0.63%

Belongings Below Administration

$297.17 billion

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The QQQ bounced off $466.43 on March 13, bounced via the ten% correction stage to peak just under the 200-day shifting common and collapsed on March 26 concurrently with the SPY, when Trump introduced the 25% auto tariffs.

The QQQs are in a lot worse form since they’re already in correction territory. The dreaded bear market territory, which is a 20% pullback from the highs, is at $432.65.

Bulls will defend if the market falls to that space, but it surely’s essential to carry as a result of a dying cross seems to be a lot nearer on the QQQ than on the SPY.

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