Markets continued to slide overnight as investor concern around the global tariff war intensified—but we may be closer to the end of this pullback than the beginning of a deeper downturn. Asian markets were hit the hardest, having remained closed during Friday’s U.S. equity flush. The Hang Seng Index dropped 13.2%, while the Nikkei fell more than 7.5%. The Thai Stock Exchange also took the rare step of banning short selling from April 8 to April 11 in an effort to stabilize markets.

Energy markets remain under pressure, with WTI crude trading below the $60 level—a significant indicator of global economic sentiment. Russia, a major oil producer and exporter, has made statements about monitoring energy markets and adjusting production levels to help restore balance.

In U.S. equity markets, S&P 500 futures initially dropped over 4% at the start of trading but have since recovered some of those losses. Could we see further downside? Absolutely. However, a technical development occurred overnight that I’ve been monitoring for several months, which may suggest we’re closer to a bottom than the start of a prolonged downturn. That said, there are still significant risks that need to be addressed swiftly to stem the bleeding in equities.

On the Schwab Network, we’ve been tracking the monthly chart for the S&P 500 (SPX) to identify key technical levels. One major area of focus has been the 50-month Simple Moving Average (SMA), which has historically served as strong support during corrections and bear markets over the past 20 years. As of last night, S&P 500 futures came within just 161 points of that crucial level.

These pullbacks are typically accompanied by the RSI falling below overbought territory and a bearish crossover on the MACD indicator—specifically, when the 12-month EMA crosses below the 26-month EMA. Both bearish signals were confirmed at the beginning of March. So, while we may still see further downside, technicians are closely watching this SMA level as a possible area for a bounce.

Historic Levels for Volatility

Volatility has surged dramatically in recent days. One telling measure is the spread between the VIX and the front-month VIX futures contract (/VX). This spread highlights market backwardation—or, in simple terms, elevated near-term uncertainty. Right now, this spread is at its second-highest level since 2004, trailing only the financial crisis. That’s historic.

On the flip side, when volatility reaches these extreme levels, it can also indicate we’re approaching a capitulation point—when investor fear and selling peak. Volatility eventually subsides, and while that doesn't always equate to an immediate market rebound, there’s roughly an 80% correlation between declining volatility and rising equity markets.

The Credit Market Risk

While tariffs and concerns over global growth have dominated headlines, the next major risk to watch is credit. So far, we haven’t seen extreme stress or fractures in credit markets during this cycle—but warning signs are beginning to emerge.

Credit Default Swaps (CDS)—financial instruments used to hedge against credit risk—are starting to rise in price in an aggressive manner. This suggests growing demand, and unfortunately, it’s coming from a low and quiet consolidation base. If market tensions calm quickly, we might avoid a full-blown credit or liquidity event. But if the trade war drags on without resolution, expect credit markets to tighten.

This can affect suppliers, logistics providers, small- and mid-sized businesses, and consumers. Historically, credit events have been one of the primary triggers of prolonged economic slowdowns. Keep an eye on high-yield credit markets and commentary from regional banks, especially as earnings season approaches.

In the short term, markets remain on shaky ground. But I always remind people to zoom out—look at the long-term chart of the S&P 500. We've weathered countless market-moving events throughout history, and yet, we’ve always come back. If your investment time horizon is long term, this time may be no different.

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