Week of Mar 02 2025

The technical picture shows substantial selling pressure, with massive CTA outflows totaling over $67 billion globally, negative short gamma positioning, and key technical thresholds at risk. Monday (March 3) is expected to see volatility-controlled strategies reducing S&P 500 exposure by approximately 4.9% of strategy AUM following last week's volatility spike. But a fascinating divergence continues between deteriorating macroeconomic data and relatively resilient corporate earnings. While NVIDIA's exceptional performance has provided tech sector support, there are larger-than-average EPS cuts for Q1 2025 (-3.5%) with Materials and Consumer Discretionary sectors most impacted by inflation and tariff concerns.

The left tail scenario involves a deeper US contraction with GDPNow remaining negative, spending continuing to decline, and PCE inflation stuck above 2.6% as tariffs create $317 billion in costs and DOGE cuts reduce government spending by $500 billion annually. Technical selling pressures could drive the S&P 500 below 5,700 and potentially toward 5,408. The right tail scenario would see technology sector resilience offsetting broader economic weakness, with Treasury short covering providing support as BofA notes price trends turn less negative. Market stabilization could begin around mid-March, with the S&P 500 potentially recovering toward 6,028/5,890 if economic data stabilizes or policy implementation moderates.

For Week 10, we'll be closely monitoring several critical catalysts, including the March 4 implementation of Canada/Mexico tariffs, ISM Manufacturing and Services reports, weekly jobless claims, and the February nonfarm payrolls report. Fed speakers and key corporate earnings will further shape market narratives. The critical question for the coming week is whether we'll see a continuation of the growth scare or the beginning of stabilization that could set the stage for recovery later in March. I'll be analyzing each new research report through this lens, focusing on how the market is processing these evolving narratives and identifying any potential inflection points in positioning, sentiment, or technical thresholds.