Market Analysis for March 11, 2025

Author

Samuel Leach
March 11, 2025

We witnessed a classic “risk-off” selloff in U.S. markets yesterday, setting a tense backdrop for today. Stocks fell sharply across the board as traders ditched equities amid mounting fears. In true style, let's break down what happened with an informal yet professional take on the action, peppered with a bit of humor (because if we don't laugh, we might cry):

Market Selloff Overview 📉

It was an ugly day on the Street. The S&P 500 got hit hard, slumping almost 3% by the close​. That drop dragged the index roughly 9% below its recent February peak, inching it near official correction territory. The Russell 2000 (small caps) fared no better – it plunged in tandem, extending its year-to-date slide. In fact, the Russell is already down about 7% YTD and 16% off its November high, underscoring how much more pain small caps have seen compared to large caps. Meanwhile, the tech-heavy Nasdaq got absolutely shellacked, sinking over 4% and confirming its correction (10% off high) last week. When the high-flyers fall out of the sky like that, you know sentiment has taken a turn for the worse.

Sectors Leading the Drop: Not surprisingly, high-valuation tech stocks led the charge lower. Many of the beloved “Magnificent Seven” mega-caps hit air pockets as those extended valuations met reality. Chip and cloud names were deep in the red – when growth fears spike, the pricey stuff tends to get pummeled. Energy stocks also slipped as oil prices fell (~-1.6% for WTI crude) on growth worries. Really, it was a sea of red across all 11 sectors; even typically defensive plays (utilities, consumer staples) couldn’t stay afloat, though they declined less than the flashy tech names. As one analyst quipped, “the U.S. market sell-off is starting to look ugly”, with long-standing concerns about elevated valuations finally colliding with a catalyst. Although I’m rather proud that my HII and GD stayed in the green on the close, power to the Samuel and Co. Team, haha.

Key Technical Levels Broken: Yesterday’s price pushed the S&P 500 below some critical technical support levels. Notably, the index breached its 200-day moving average, a line traders often view as the demarcation between a long-term uptrend and a downtrend. In fact, Friday flirted with that level (~5,730) and needed an immediate bounce to keep bulls hopeful. That didn’t materialize – instead, sellers smashed through it. Market breadth was terrible too: over half of S&P stocks fell below their 200-day averages, the weakest breadth reading since 2023​. In other words, the weakness isn’t just a few bad apples; it’s the whole orchard. A combination of factors provided the spark for this sell-off, including trade-war jitters, geopolitical tension, and an uncertain economic outlook – basically a perfect storm of worry​. When a U.S. President declines to rule out a recession as a possible outcome of his tariff policies (yes, that happened), it tends to roil investor sentiment​. Talk about pouring fuel on the fire! Little wonder the “R word” (recession) is back on everyone’s lips​ as we head into today.

VIX & Market Sentiment 😱

Fear is on the rise – you can literally see it on the charts. The CBOE Volatility Index (VIX), Wall Street’s favorite “fear gauge,” spiked hard during the selloff yesterday. It jumped nearly 20% to around 25, marking its highest level of 2025 so far​. For context, a VIX reading in the 20s or higher is generally a sign of elevated investor anxiety​. We’ve blasted right through that 20-level, indicating traders are scrambling for protection. The VIX essentially measures expected volatility via S&P options – and right now, expectations of turmoil are mounting. As one strategist reminded us, a VIX climbing into the 20s suggests weakening equity market sentiment and is often dubbed an “uh-oh” signal by veteran traders. So, what is this telling us? Basically that investor sentiment has done a 180 from the complacency we saw earlier in the year. A week or two ago, folks were cautiously optimistic; now fear and uncertainty are in the driver’s seat. Put-call ratios have risen alongside the VIX as traders rush to buy downside hedges. It’s a classic flight-to-safety playbook: selling stocks, bidding up defensive assets (more on bonds and gold in a moment), and paying up for portfolio insurance. The mood went from “buy the dip” to “sell the rip” real quick.

Does a surging VIX signal more downside or a contrarian bounce? That’s the million-dollar question. An elevated VIX can sometimes mean the market is near a capitulation point – when fear hits an extreme, it often precedes a relief rally as selling exhausts itself. Some opportunistic traders (the bold or perhaps the crazy ones) will start looking for a “volatility peak” as a buy signal. Historically, VIX spikes into the 30s have coincided with short-term market bottoms. We’re not quite there yet: one research note from DataTrek pointed out that while a high VIX can offer a buying opportunity, we aren’t quite at that level of panic yet​. In other words, fear is high, but it might need to get a tad worse before the market gods grant us a tradable bottom. Until then, caution is warranted.

At the same time, sentiment is getting so bearish that any whiff of good news could spark a face-ripping bounce. Paradoxical as it sounds, when everyone is super pessimistic, the bar for a positive surprise gets very low. As one market veteran noted, “sentiment is so bad now that markets will likely turn positive at the hint of anything positive”​. We could be one cooler inflation reading, or one dovish Fed remark, or one trade truce headline away from a sharp relief rally. In the near term, though, the scale of the VIX jump tells us to remain on guard – volatility breeds volatility, and big swings (in either direction) are likely to continue.

Macro & Economic Factors 🌍💹

What’s driving this burst of market stress beyond just charts and fear gauges? In a word: macro uncertainty. There are a few big-picture factors weighing on traders’ minds:

  • Inflation and the Fed: Inflation remains stubbornly above the Fed’s 2% target, and that’s a problem. Recent data has shown price pressures easing only gradually, not falling fast enough for comfort. The Fed, in response, has maintained a hawkish tone – they’re not exactly riding to the rescue of equities. In fact, the Fed’s latest commentary dropped any language about “inflation is easing” and instead admitted inflation is “remaining elevated”, which is Fed-speak for “we’re not done worrying about it”. This shift in tone has not been lost on the market. Investors are realizing the central bank may keep interest rates higher for longer than they’d hoped. The old dream of rate cuts later this year? Fading, and fast. One investment officer noted that the market has been “wrong to expect significant easing by the Fed” anytime soon given sticky inflation​. In short, the punch bowl of easy money isn’t coming back just yet, and stocks are recalibrating to that reality.

  • Growth Jitters and Recession Fears: At the same time, there’s growing worry that the economy might be slowing down too much. We’re seeing a bizarre mix of both inflation and recession fears – the dreaded “stagflation” one-two punch. As an example, the Atlanta Fed’s GDP tracker for Q1 swung into negative territory (signaling a potential mild contraction), and traders are nervously eyeing any data that hints at a sputtering economy. It doesn’t help that the bond market is behaving as if a downturn is coming (more on bonds in a second). Talk of stagflation has crept back into discussions – an environment of slowing growth coupled with still-high inflation. That’s pretty much a nightmare for risk assets, because it pressures corporate earnings (due to rising costs) at the same time consumers/businesses pull back. No wonder everyone’s on edge. The market is essentially saying the Fed might over-tighten into a slowdown, or that external factors (like those tariffs and geopolitical issues) will cool the economy. Bears are shouting “recession” again (maybe prematurely, but they’re vocal).

  • Bond Yields & Credit Markets: Typically, when stocks plunge like they did yesterday, you’d see a big flight to safety in Treasurys. And we did – to an extent. The 10-year Treasury yield has actually been falling recently as investors seek refuge in bonds, dropping from around 4.8% in early January to ~4.2% now​. On the surface, lower yields might sound like a good thing for stocks (since it eases pressure on valuations), but in this case the decline in yields is being driven by growth fears and a dash of Fed pivot hopes – not exactly comforting. In other words, people are buying bonds because they’re worried the economy could crack, not just because they think inflation is beaten. It’s a bad-news-is-good-news (for bonds) dynamic. The irony, as one analyst pointed out, is that this administration’s actions (like aggressive trade policies) are engineering downside risks to growth, which in turn pulls yields down – but that’s hardly a win from a big-picture perspective. The bond market seems to be pricing in that the Fed may have to cut rates later this year if a recession hits – futures are even toying with the idea of a few rate cuts by year-end. However, in the immediate term, rising uncertainty has also started to widen credit spreads and make financing more expensive for companies, which can create a negative feedback loop for equities.

  • Other Macro Factors: We can’t forget the overhang of policy and geopolitical issues. The market is digesting the implications of ongoing trade tariffs, which are inherently inflationary (tariffs raise import costs) and disruptive to corporate supply chains. Tariff turmoil has been a recurring source of confusion and concern – one day there’s a hint of a deal, the next day more tariffs. That kind of whiplash has real economic effects and has CEOs on edge. Also looming in the background is the U.S. debt ceiling debate and government funding issues (never a pleasant topic for markets). While not front-and-center today, these could become flashpoints in coming weeks if not resolved, adding to volatility. Globally, there are the usual suspects: uncertainty in Europe’s energy situation, tensions in certain hotspots, you name it. In short, the macro environment is unusually murky right now. As a trader, I’m juggling a ton of cross-currents: will the Fed tighten or ease? Is inflation or recession the bigger threat? It’s like trying to solve a puzzle where the pieces keep changing shape.

To sum up the macro picture: mixed signals galore. Inflation isn’t low enough for the Fed to save the day, but growth worries are growing loud – a precarious balance. This dynamic is contributing heavily to the market’s nervous breakdown. Until we get clarity one way or the other (e.g. a clearly cooling inflation trend or evidence that growth is holding up), expect the macro-driven mood swings to continue.

Technical Levels & Recovery Scenarios 📊

With the market in tailspin mode, technical analysis becomes especially useful to map out potential support and resistance levels – kind of like identifying safety nets (or further trap doors). Here’s the lay of the land from a charts perspective:

  • S&P 500 Key Levels: As mentioned, the 200-day moving average (around the mid-5700s on the S&P) gave way under today’s selling pressure. Bulls really wanted to defend that line – it had been a make-or-break support in recent days. Now that we’ve closed below it, technicians warn it could “leave a breakdown pending confirmation” if we don’t quickly reclaim that level​. In plainer English: the door for further downside is open unless buyers step up fast. The next critical support to watch might be around the 5600 area (roughly where we closed today) and then the 5500 zone below that. Those levels correspond to some prior consolidation areas last year. If those don’t hold, the fall could extend toward 5400 (which would be about a 10%+ drop from the highs, putting the S&P solidly in correction and nearing a bear market). On the flip side, any rebound will face an immediate test at the old support ~5730-5750, which now likely acts as first resistance (the principle of broken support becoming resistance). Above that, the 5800 level – which one analyst pinpointed (~5783) as the line that needed to hold to avoid a breakdown​ – would be the next hurdle. Only a rally back above 5800 would make the “all-clear” signal start to blip again. Until then, caution is warranted as the trend bias has turned bearish in the short term.

  • Russell 2000 (Small Caps): Small-cap stocks have been hit even harder. The Russell 2000 is already deep into correction territory and only a few bad days away from a potential bear market (20% down from highs). It’s sitting roughly 16% below its peak from last year, which means small caps have underperformed large caps significantly in this downturn. Key levels for the Russell? We’re looking at the 1900 area as an important support zone (a round-number level and not far from the index’s 200-day MA as well). If that fails, 1800 is the next psychological and chart support (which harkens back to the lows of last summer). Given small caps’ sensitivity to the domestic economy and credit conditions, a lot will depend on whether investors start sniffing value in beaten-down smaller names or continue to avoid them due to recession fears.

  • Will We Bounce or Break Further? In the very near term, the market is oversold by many measures. The speed and magnitude of this pullback have pushed short-term oscillators (like RSI, McClellan oscillator, etc.) into zones that typically precede at least a minor bounce. One well-known technical strategist, Atish Patel, noted that this area could “act as a staging ground for a brief oversold bounce” given his short-term indicators. We’re talking a tradeable reflex rally that could yank the S&P back up a few percent from yesterday’s lows. Supporting that case, there’s chatter that some big institutional players (think pension funds or big asset managers) may use these technical support levels to do a bit of buying. “These longer-term trendlines can be used by institutions to buy up shares,” as one chief strategist explained, so we “expect to see some potential buying down around here”​, but I’m not so convinced. In other words, bargain hunters might finally show up with their shopping lists if prices dip much more, viewing this pullback as an opportunity to accumulate quality stocks at a discount after the market’s strong run last year.

However – and this is a big however – if the bounce doesn’t materialise and support levels keep failing, the decline can feed on itself. We saw a lack of buyers at the 200-day, which is worrisome. The next day or two are critical. The bulls need to produce a bounce to show that the market still has a pulse. If instead we see another flush lower today (with no bid in sight), it could trigger more systematic selling (think risk-parity funds reducing exposure, or trend-following algos pressing shorts now that the uptrend is broken). The bear case is that this pullback isn’t over – that we might need to test much lower levels (possibly last October’s lows) before finding a durable bottom. Some traders will likely position for more downside, shorting bounces into resistance or buying puts, until there’s evidence of a capitulation (e.g. VIX spike into the 30s, a huge volume washout day, etc.).

Potential Trade Setups: In true trader fashion, here are a couple of scenarios. For the nimble and bold: playing an oversold bounce. That could mean nibbling on an index ETF or some bruised big-cap names with tight stop-losses just below today’s lows – essentially betting that we’ll get a reflex rally in the next session or two. The risk, of course, is catching a falling knife, so anyone attempting this needs discipline (and maybe a strong stomach). On the other side, those who are more cautious or bearish might look to fade any bounce that loses steam around resistance (say the S&P pops back toward 5750-5800 and starts stalling – that could be a cue to initiate shorts or sell into strength). The idea is that unless we get a clear upside catalyst, rallies might be short-lived in this environment. Many seasoned traders are also turning to options strategies – for instance, buying volatility or using bear put spreads – to position for continued choppiness while limiting risk. And of course, plenty of folks are simply hugging cash a bit tighter right now, waiting for the dust to settle. There’s no shame in sitting out the knife fight and preserving capital for when probability swings back in your favor.

In summary, from a technical lens the market is at a critical juncture. We’ve broken some key supports, momentum favors the downside, but we’re also short-term stretched to the downside, which often leads to a bounce. The next bounce (when it comes) will be very telling: strong and high-volume would suggest the worst might be over, whereas a feeble, low-volume uptick that fails at resistance would likely invite the bears to pounce again. Keep an eye on those levels – they’ll be magnets for trading activity in the sessions ahead.

What to Watch for Today March 11 📅

After yesterday’s drubbing, all eyes turn to what could influence tomorrow’s session. Here’s your trader’s checklist for Tuesday, March 11, 2025:

  • JOLTS Job Openings (10:00 AM ET) – This labor market report will be a focal point in the morning. It’s expected to show 7.71 million job openings (vs 7.60M previous)​. A hotter-than-expected number (lots of job openings) might spook investors about wage inflation and Fed hawkishness, whereas a big miss could amplify recession fears. In this twisted market, it’s almost a lose-lose if the number comes in too extreme on either side. However, a Goldilocks outcome (slightly cooling openings, but not a collapse) might calm nerves.

  • 3-Year Treasury Note Auction (1:00 PM ET) – Midday, keep an eye on the bond market as the U.S. Treasury auctions 3-year notes. The last similar auction had a yield of about 4.30%​. Strong demand (indicated by a high bid-to-cover ratio and yields stopping through lower) would signal that investors are flocking to safety of Treasurys – which could either be reassuring (confidence in U.S. debt) or worrying (why are they so desperate for safety?). A weak auction, on the other hand, could send yields jumping and put fresh pressure on stocks. Consider it a sentiment litmus test for how global investors view the outlook and risk at the moment.

  • Any Updates on Trade/Tariffs or Geopolitics – Given that trade war headlines have been a catalyst, any overnight news on U.S.-China or U.S.-Canada/Mexico tariff negotiations will be crucial. If, say, there’s an announcement of a truce or tariff pause, expect a relief bounce in companies that have been tariff punching bags (industrial and tech sectors especially). Conversely, tough talk or new tariff threats could fuel another wave of selling. Geopolitical surprises (hopefully none) fall in the same category – the market is hypersensitive to any additional uncertainty right now.

  • Fed Speak or Economic Data Surprises – While no Fed meeting is scheduled immediately, be wary of any Fed officials making unscheduled comments or leaks. The market would pounce on any hint of dovishness (or hawkishness). Also, though not on tomorrow’s docket, traders are already looking ahead to Wednesday’s CPI report – so any rumors or analyst forecasts about that could sway sentiment on Tuesday. In short, macro news rules the day. If inflation expectations pull back even a tad, it could take pressure off yields and give stocks a breather.

  • Technical Trading and Investor Positioning – Today, we’ll see if those key technical levels mentioned above attract buyers. Watch the S&P’s behavior around today’s low (~5568). If we break below it early, it could trigger some stop-loss selling and algorithmic trades that exacerbate the drop. If we hold it and bounce, it might embolden dip-buyers. Also, keep an eye on the VIX in the morning – if it spikes much above 30, it could indicate capitulation is near, oddly setting the stage for a bounce. Many hedge funds and traders likely lightened positions or added hedges in the selloff; how they reposition today will influence the tape. Will they pile back in on any strength, or continue to sell rallies? The first hour of trading should give clues. Additionally, overseas markets’ reaction (Europe and Asia trading before U.S. opens) will either reinforce or ease our panic. If we wake up to a sea of red globally, that could intensify U.S. selling at the open. Alternatively, if other markets stabilize overnight, it might help put a floor under Wall Street at least initially.

Lastly, it’s worth noting that sentiment is extremely fragile – but that means any good news could have an outsized positive impact. As one market watcher observed, with pessimism running rampant, even a hint of a positive development (e.g. avoiding a government shutdown or a surprise diplomatic breakthrough) could spark a sharp rebound.​ We’re at that point in the downdraft where hope, however small, could jolt the market upward. So today, aside from the scheduled items, keep your ears open for unscheduled surprises. This trader will be watching futures like a hawk and pre-market for any sign of a turnaround (or, conversely, any indication that we’re in for more pain).

The battle between dip-buyers and trend-following sellers will play out around those technical levels we discussed. And everyone will be on high alert for news – good or bad – that could swing sentiment. In this kind of environment, flexibility and risk management are paramount. As a seasoned trader might wryly say, “Keep your seatbelts fastened – turbulence ahead.” But hey, with turmoil comes opportunity for those level-headed enough to seize it. Let’s see!

Happy Trading

Samuel Leach