{"id":76706,"date":"2025-10-11T17:28:47","date_gmt":"2025-10-12T00:28:47","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=76706"},"modified":"2025-10-11T17:29:48","modified_gmt":"2025-10-12T00:29:48","slug":"month-of-melt-up-vanished-in-one-day-of-tariff-anguish-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2025\/10\/11\/month-of-melt-up-vanished-in-one-day-of-tariff-anguish-the-market-breadth\/","title":{"rendered":"A Month of Melt-Up Vanished In One Day of Tariff Anguish – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

China and the U.S. have an unstable relationship. Each country needs the other and yet they cannot co-exist peacefully in the global economic or political sphere, especially when nativist flames and security alarms are burning brightly. That lingering instability came to prominence one more time after trade negotiations broke down (yet again) between the economic powerhouses. What on the surface seemed like a multi-month detente exploded into a war of words and policy. When China implemented new export restrictions on rare earths<\/a> on Thursday (October 9), the stock market barely budged. The melt-up clearly dulled the senses<\/a> (and mine!) with the S&P 500 losing just 0.3% and the NASDAQ bouncing from an intraday low to close nearly flat. The President’s response<\/a> the following day triggered the anguish that caused a month’s worth of gains from the melt-up to vanish in a flash.<\/p>\n\n\n\n

In the morning, Trump his irritation on Truth Social, calling China “hostile” and threatening more substantial tariffs. The President caught the stock market in the middle of a well-rehearsed return to melt-up mode, ignoring any and all risks. The S&P 500 opened higher in the first 15 minutes with a 0.4% gain. Sellers tentatively took price back to the open. Trump’s post emboldened the sellers and the stock market slid nearly non-stop from there.<\/p>\n\n\n

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\"S&P
S&P 500 (SPY) 15-minute chart<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n

The subsequent carnage created a kind of “October surprise” that is only remarkable because of the high level of complacency that preceded the dramatic selling. As I noted a week ago<\/a>, the volatility index (VIX) was warning about an imminent surge in fear. I also suggested that it was impossible to bet on the exact timing of this surge given the market’s blissful melt-up behavior; I tried to guess at a potential catalyst:<\/p>\n\n\n\n

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“This week\u2019s key reason for caution comes courtesy of the volatility index (VIX). The VIX has a bottoming pattern as it hugs ever more closely to its level from right before the tariff drama, trauma, and noise. In other words, volatility looks ready for another surge. Given October is the last of\u00a0the stock market\u2019s most dangerous months of the year<\/a>, one more VIX pop seems both appropriate and timely. Yet, a convincing catalyst remains elusive. Perhaps some signal actually emerges that suggests this latest government shutdown could get worse than the last one.”<\/p>\n<\/blockquote>\n\n\n

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\"The<\/a>
The volatility index (VIX) leapt by 31.7% and broke out to a 4-month high after fresh tariff tensions erupted.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n

I drew the purple “bowl” shape to further highlight the upward pressure on the VIX.<\/p>\n\n\n\n

Now, with Trump setting a November 1st, or earlier, deadline to implement a retaliatory additional 100% tariff on China<\/a>, financial markets need to completely reorient toward risk away from complacency. The after hours announcement sent stocks even lower, setting up the potential for a rough open on Monday without counteracting news. This abrupt adjustment in sentiment creates the classic October pullback that typically generates an opportune buying opportunity ahead of the seasonally strong November to April\/May time period for the stock market. In other words traders and investors must hold two conflicting ideas:<\/p>\n\n\n\n