Week ahead: The war room is open and Monday could be manic

The war room is open

Investors are bracing for a bruising session at Monday’s Asia Open, with China markets squaring up to the full weight of the trade war. The U.S.-listed China ADR index cratered nearly 9 % on Friday — its worst wipeout since October 2022 — and local traders are now in position to react to Beijing’s 34% across-the-board retaliation tariffs.

Layer on new rare earth export curbs and state media vowing to “fight till the end,” and you’ve got the makings of a Monday open with serious downside risk. The Hang Seng China Enterprises Index — 2024’s comeback kid — is teetering on the edge of technical correction territory. One more flush, and we’ll be staring down full-blown bear market headlines by midweek.

Don’t ignore the yuan. After Trump’s tariff barrage, onshore CNY sank to its weakest level since February — and there’s growing chatter that Beijing may let it drift even lower to offset tariff damage. That would supercharge FX volatility and raise the risk of broader capital flight.

While Vietnam, Indonesia, Singapore, and India tiptoe toward the negotiation table, Beijing grabbed a sledgehammer. China’s retaliation wasn’t calibrated — it was a blunt-force blow that ripped through sentiment and kicked off a full-blown feedback loop of fear.

Trump, for his part, seems content watching the S&P bleed — $5.4 trillion erased in 48 hours — without blinking. There’s no sign of an off-ramp, just more escalation. Markets are quickly waking up to the reality: the U.S. is willing to let Wall Street burn to win a trade war.

Monday’s Asia Open could be a bloodbath. Unless “Team China” shows up with serious size and steps in aggressively, equities are in the crosshairs, and the recession drumbeat turns into a war march. The gloves are off. The world’s two largest economies are locked into Trade War 2.0 — and this time, it’s no longer sabre-rattling. It’s impact.

Last week exceeded all expectations on the crazy front

Let’s not sugarcoat it — last week was straight-up financial mayhem. If you thought we were already deep in the woods, markets handed us a map, lit it on fire, and said, “Good luck.”

Equities cratered. Oil collapsed. Yields whipsawed. Gold spiked, then faceplanted. CTA models went full-on bear selling any moving tape.. Margin desks went DEFCON 1. And oh yeah, let’s not forget: the global trade war officially went thermonuclear.

This wasn’t just volatility — this was volatility with a vengeance. Every major asset class took a hit or reversed hard. The S&P entered freefall territory, the dollar couldn’t decide if it wanted to be a haven or a hazard, and systematic flows turned full liquidator mode.

Geopolitics? Unhinged. Policy response? MIA. And the Fed? Still playing the “wait and see” game as traders screamed into the void.

If last week didn’t shake your convictions, your caffeine intake isn’t high enough. We’re not in Kansas anymore — we're in the wild zone now.

Mr. Market is still searching (lower) for a put strike

Let’s be honest — there’s no Powell Put in sight, and Mr. Market knows it. That’s why we keep sliding. It’s not panic yet — it’s precision hunting for the level where policy blinks, liquidity taps open, or something breaks loud enough to matter.

The problem? The strike keeps drifting lower. Every 500-point drop in the S&P is met not with “Crickets”. No White House backpedals on tariffs. Just systematic selling, option hedging, and a Fed that still thinks time is on its side.

Until then? Markets will keep punching holes in the floor, pricing in pain until someone — anyone — flinches.

This isn’t about valuation anymore. This is about finding the level that triggers rescue. And the lower we go without it, the uglier the landing gets.

CTA selling is back with a vengeance — And it’s about to get very ugly

The machines are back — and this time, they’re not nibbling. They’re slashing.

Commodity Trading Advisors (CTAs) have flipped from neutral to aggressively short across key asset classes and riding and powering what looks like a full-blown risk liquidation cascade. What started as a tactical unwind is now a systematic bloodbath, with momentum signals all flashing red at once.

The shift is violent: WTI net CTA positioning swung from 9% short to 73% short in just one session — a pivot of this magnitude hasn’t been seen since the SVB collapse. Add to that massive selling pressure in equities and metals, and it’s clear: we’re in the jaws of a momentum-driven de-risking event.

This is where things get dangerous. CTAs aren’t emotional — they don’t panic. But once their models trigger, they sell size… and they don’t stop until the tape tells them to. Volatility fuels more selling, and selling begets more volatility — the classic doom loop.

If you’re looking for a floor, don’t count on fundamentals to save you — the algos don’t care about valuations. Until vol settles and trend signals bottom out, the pressure stays on.

CTA selling is no longer a whisper. It’s a scream. And unless the market finds its footing fast, this is going to get very ugly, very quickly.

Every bank’s got a volatility panic meter — you know, the proprietary “Panic Index” they roll out when markets get jumpy. Cute. It tells you when we’re oversold, when sentiment’s max fear then maybe it’s time to fade the bloodbath. But here’s the uncomfortable question nobody’s asking:

What happens when the panic index breaks?

What happens when we’re no longer just oversold, but unanchored? When vol regimes decouple from valuation, and price discovery turns into price destruction? What happens when every vol target fund and risk parity model goes into 100 % forced de-gross mode, and some out of business— and that cute little dashboard the banks love to flash starts flashing error?

That’s not a mean reversion setup — that’s a liquidity event.

There’s a difference between panic and disorder. Most of Wall Street is still trading like we’re in the former. I’m not so sure anymore. Once the models start feeding on themselves, the only index that matters is how much cash you have in the bank.

Margin clerks enter the chat: Bracing for the worst week of their lives

When markets puke this hard, this fast, there’s one group of unsung heroes-turned-villains quietly preparing for battle: margin clerks. And this week? They’re staring down the barrel of the ugliest stretch since the Covid crash.

Forced liquidations. Panic calls. Frozen screens. Risk limits blowing out left and right. You name it — this is margin season, and it’s not going to be pretty.

If your position isn’t nailed down, it’s probably getting sold.

Many on the street have moved into the “sell what you can to cover what you must” spiral mode, even the strongest trades are up for grabs.

Let’s just say it: Margin clerks are about to earn their stripes — or lose their minds.

As I said weeks ago, Flat is the strongest position. When in doubt, get out. But it is likely too late for that now, and you will likely need to white-knuckle it for a few weeks

The view

There’s no mystery here — the market is doing one thing and one thing only: pricing in a global recession. The message from credit, equities, and FX is deafening. The circuit breakers? We’re running out of them fast.

Central banks can only do so much. The ECB’s path is clear — it has to pivot dovish. EUR/USD strength is disinflationary and pours gasoline on the tariff fire. That’s their lane, and they’ll take it.

But the Fed? Pinned. The U.S. is ground zero for this supply shock. Inflation is coming in hot — and the tariffs are about to supercharge that. There’s no easy rate cut option when CPI is about to print with a vengeance a month or two from now.. Powell’s hands are tied.

So what’s the play? Fiscal. That’s the only real circuit breaker left.

Trump’s tariff barrage isn’t just policy—it’s a stealth tax bomb detonating under the U.S. economy. This spiral accelerates fast if that shock isn’t met with a fiscal counterpunch. And here’s the kicker: Treasury Secretary Bessent had a golden window to stabilize the tape post-announcement—and he blew it.

Not only did he pass on re-anchoring the narrative, he hinted he wasn’t even in the room. That’s not just bad optics—it’s a full-on confidence killer. If the bond market starts thinking that a former CEO of a bond broker firm is freelancing U.S. trade and debt strategy, we’ll have more significant problems on the sentiment front.

The fix? Real fiscal firepower. That means household relief checks to blunt the tariff punch. That means retroactive tax cuts in the reconciliation bill already moving through Congress—something, anything, to offset the tightening that’s now slamming into the system.

But here’s the problem: Republican leadership is moving like turtles. The idea that they can wait until summer to act is delusional. Markets say you have days to get your act together, maybe a few weeks, but certainly not months.

Without a fast and focused fiscal response, the U.S. economy is heading for a hard landing — and this time, there’s no Powell Put to cushion the fall.