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We’re heading into the final full trading week of the first quarter of 2025, and it’s been a tough one for the U.S. market. Other parts of the world, specifically Europe and China, are set to cap off a remarkable quarter, which begs the question: Can these trends continue into Q2?

I’ll be covering my quarterly forecast and gameplan in my Trinity Trade masterclass on Wednesday, but it’s safe to say there are some more risks of volatility here in the immediate future.

The bigger question beyond these market trends from Q1 is whether the economy is heading into a full blown bear market and ultimately, an economic recession. 

Let’s discuss… 

Every Current Short-Seller is a Future Buyer

One of the trickiest characteristics of a bear market is that they often feature some of the sharpest rallies. This may sound counterintuitive at first, but it’s a simple function of short- covering. 

In other words, everyone betting that the market is going down now will automatically become a buyer in the future. By definition, this is what it takes to close out a short position.

Short squeezes happen when the shorts get trapped. We saw a modest short squeeze play out this past week, but it’s very evident there aren’t aggressive short-term buyers in this tape at the moment.

Here’s the thing: Corrections are common, but only around ⅓ of these corrections actually turn into bear markets.

It’s one of the reasons I talk so much about time when it comes to trading. Since the market’s long-term trend has been up, it’s going to spend more time rallying than declining. But it’s also the reason why it’s been said that stocks take the escalator up and the elevator down.

From an internal perspective, I still need to see more to be convinced that a bottom is complete. But I suspect if stocks do drop to new lows, then “the bottom” could be complete. In other words, we’re past the worst of this decline already.

As always, I’ll keep you posted and be back Monday with an updated Tale of the Tape,

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