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Stocks collapsed on Friday when President Trump threatened another trade war.

In this particular instance, the President claimed that China was threatening to impose export controls on numerous items that are critical for technology, specifically, rare earths elements. To counter this threat, President Trump suggested he would impose new tariffs of 100% on all Chinese imports starting November 1st, 2025.

Stocks nose-dived on the news, with the S&P 500 finishing down almost 3%. The technical damage from the move was significant, with the index taking out both its 8-day exponential moving average (EMA) as well as the all-important 21-EMA for the first time since the April bottom.
 

While this move was painful, it was NOT unexpected. Stocks had gone practically straight up for the better part of six months and were more than due for a correction. In investing, nothing goes straight up or down. And a 32% rally in six months is an extraordinary move!

As I write this Monday morning, stocks are bouncing due to President Trump announcing that he will in fact, meet with China’s President Xi in a few weeks, which suggests that his prior threats of increased tariffs will not materialize.

In this context, the big question for investors is whether this is simply a “dead cat bounce” and the bull market is OVER… or if markets were once again duped by President Trump into believing the worst, only for the President to reverse course and send stocks to new all-time highs as has been the case numerous times since the April lows.

To answer that, I rely on a proprietary indicator that has triggered before every major meltdown in the last 50 years. This signal caught the 1987 crash, the Tech Crash, the Great Financial Crisis, and more.

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