HX Weekly: April 21 - April 25, 2025

Hello reader, welcome to the latest issue of HX Weekly!

As you probably know, we stopped publishing HX Daily back in February.

Since then, we've been very focused on the beta for our algorithmic trading platform, Signal Trader Pro. We're incredibly proud of it and are prepping for an official launch on May 1st. Check out our Signal Trader Pro site here if you haven't seen it.

If you would like to continue to receive similar FREE DAILY content from me (Enrique Abeyta ) – please sign up for my free e-letter Truth & Trends, which published by Paradigm Press Group publishes.

You can subscribe by clicking on the box below…

So, what's HX Weekly all about?

Well, each Friday, we'll bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

I: Thoughts on the Market – What’s Next for the S&P 500 and Market

If you’ve been following the S&P lately, it’s been a roller coaster ride.

One day it’s up 2%, the next it’s down 2%. And who knows what will happen tomorrow.

For traders, this can be extremely frustrating and it’s nearly impossible to find a trend to trade against.

There is a ton of NOISE in the market right now!

• The rulers of countries are battling it out on social media over tariffs

• Trump is threatening to fire Fed Chairman Powell one day, then saying he’s got a job the next

• Cramer is on CNBC in the morning claiming that maybe the bottom is in and later that evening saying maybe it’s not

All of this noise is driving a tremendous amount of market volatility.

Just look at this 3 month S&P 500 Chart:

After hitting a record level of 6,152.87 on February 19, 2025, the S&P 500 declined almost 20%. Then on April 9th, the index saw its biggest one-day gain in years!

Specifically, the S&P 500 jumped 9.52%, closing at 5,456.90. This rally followed a period of market uncertainty, including the rise in bond yields and potential tariff increases.

Then there were major declines again. And just this week, the index is attempting a multiple day to rally on no major news.

As traders, who are we supposed to listen to and what are we supposed to do?

Well, during periods of volatility like these its valuable to return to technical analysis to cut through the noise and get a sense of what’s actually happening.

So, let’s take a look at a longer term S&P 500 chart from LPL Research:

What does this chart show us? Well, there a few key learnings here.

First – the long-term trend is intact.

One of the key insights from the S&P 500 chart is that, despite a 16% drop, the index's long-term upward trajectory is still intact. This is demonstrated by the S&P 500 rebounding from a rising trendline that connects the lows of March 2020 and October 2022. This indicates that the market’s most probable direction remains upward—though short-term volatility and risks still persist.

Second – a capitulation event probably occurred.

The heavy wave of selling in the stock market earlier this month likely signaled a capitulation point, hinting that the index’s drop to approximately 4,835 may represent the bottom of the current downturn. Supporting this view is the fact that this low aligned with two key support zones: a horizontal support level tied to the S&P 500’s January 2022 high, and an upward-sloping trendline dating back to March 2020.

As Enrique Abeyta recently pointed out on April 3rd in a Truth & Trends post, When Panic Turns to Profits – “Every panic feels different, but they all act the same. Whether it was COVID, the financial crisis, or the dot-com crash, we’ve seen this movie before. And we know exactly what to watch for.”

Enrique’s post details four key signals that investors should watch for to come out on top of this volatility. Read the full article here.

Third – the volatility probably isn’t over

Although the stock market may have already gone through a capitulation phase, that doesn’t necessarily signal the end of volatility—or rule out the possibility of additional declines. In fact, LPL pointed out that weak stock participation and the absence of leadership from cyclical sectors indicate a heightened risk that the S&P 500 could revisit its recent low near 4,835.

According to LPL, holding that key support level is critical for the index’s broader uptrend to remain intact. On Tuesday, the S&P 500 climbed roughly 1.5% to close at 5,234.

So, what should we do now?

First and foremost. Don’t panic, and don’t try to time the bottom.

As we’ve written about frequently this month, if you are trading, apply the 3.5% rule. Use pullbacks as opportunities to buy something. Conversely, use rallies to sell something to trim your portfolio down to winners and raise some cash for future trades.

Last, but not least, when you’re feeling down look at the long-term chart and remember the trend is intact. remember to look at the long-term trend.

In times of market volatility, its easy to focus on short-term events and easy to to forget that stocks are basically just trading at levels thy were a year ago.

When you look at it like that, things don’t seem so bad do they?

II: HX Daily Redux – Defeating Your Internal Wiring to Win

Today, we’ll revisit an HX Daily post from Dec 2024 titled "Defeating Your Internal Wiring to Win”.

We feel this piece is a good companion to the preceding section. Enjoy!

Here at HX Research we spend a lot of time thinking and writing about human biology and psychology.

We mention biology because we believe that almost all of our psychological biases are hardwired into our bodies as part of evolution.

These are the psychological biases that prevent us from being good (or great) traders and investors. They are also the biases that create great opportunities for those able to identify them.

We recently were reading a good note from “The Million Mission” by Davis Wilson. Davis rights a free newsletter that talks about his journey to turn $100,000 into $1 million through trading and investing.

This might sound familiar to some of our readers that have been with us for a while as we did something similar with “The Hard Money Million Dollar Podcast” several years ago.

Now, our mission was to turn $10,000 into $1 million through any means that was legal!

Trying to 100 times our money led us to be willing to take some extreme risks. Davis is doing something much more sensical (ha ha!), but like The Hard Money team and myself he has some great lessons for investors in his journey.

We encourage you to sign up for his newsletter and you can do so here.

In his note he shared a fascinating psychological study that speaks to one of the strongest biases in investing.

Here is the story…

He talks about two versions of a New York Times book review being shown to two different focus groups.

Here is the first version:

In 128 inspired pages, Alvin Harter, with his first work of fiction, shows himself to be an extremely capable young American author. A Longer Dawn is a novella - a prose poem, if you will— of tremendous impact. It deals with elemental things: life, love, and death, and does so with such great intensity that it achieves new heights of superior writing on every page.

Here is the second version:

In 128 uninspired pages, Alvin Harter, with his first work of fiction, shows himself to be an extremely incapable young American author. A Longer Dawn is a novella - a prose poem, if you will— of negligible impact. It deals with elemental things: life, love, and death, and does so with such little intensity that it achieves new depths of inferior writing on every page.

As Davis points out his note the reviews are very similar.

The only difference are simple changes in words. For instance, “inspired” became “uninspired.” There were several other similar changes.

One is clearly a positive review while the other is clearly a negative review.

The fascinating point about this study is that the NEGATIVE review was judged to be 14% more intelligent and have 16% greater literacy. The negative reviewer was also deemed to be more experienced while the positive reviewer was deemed to be more naïve.

This is a bias that we talk about at HX Research ALL THE TIME – our biological programming to be negative.

There have been biological studies that have shown that the human body responds to negative stimulus at a ratio of eight to one. This means that our bodies are programmed to respond more to bad news.

As we often points out, this makes a lot of sense when thinking about evolution.

In prehistoric times eating a good meal sated our hunger and kept us alive for another day. On the other hand, getting eaten by a sabretooth tiger meant the end our lives and genetic line.

It sounds like a silly example, but it is a powerful one.

This is the psychological bias that the media uses to get us click on their stories. It is also the bias that the “smart” money uses to get you to pay them big fees to manage your investments.

Finally, it the bias that can end up costing YOU a lot of money.

Our money-making system is based on turning this weakness into a strength. We actively seek out situations where we can take advantage of other investors’ overreaction.

Remember this study about perspective the next time you are afraid and thinking of selling. Maybe you will end up buying instead…

III: Market Wizard’s Wisdom – David Tepper

During trying times, we often look to the past for wisdom to guide us.

The continuing market volatility we’re living through reminded us of quotes from a post we published in September ’24 titled “The Wisdom of David Tepper”.

We hope that you find his sage advice as valuable as we do. Enjoy!

We like to share the stories and wisdom of some of the greatest past and present investors. Many of those are investors from the past have timeless wisdom that still holds up today. Some are not very well known and operate quietly but still have great insights.

There is another group that we talk about seldom—the market titans of TODAY.

These are the Market Wizards who have created billion-dollar fortunes by operating investment funds in the past few decades. Today (a day after his 67th birthday), we discuss one of the most successful of all time: hedge fund manager David Tepper of Appaloosa Management.

Tepper was born in a middle-class family outside of Pittsburgh in 1957. He attended my alma mater – the University of Pennsylvania – before getting an MBA from Carnegie Mellon University in 1982.

Tepper began his career in the corporate world working for Republic Steel in Ohio but switched to investing early on. Soon, brokerage giant Goldman Sachs recruited him to work as a bond analyst, with a special focus on bankruptcies and complex situations.

He is said to have played a key role in helping Goldman navigate the stock market crash of 1987. After being passed over as a partner at Goldman twice in two years, he decided to set up his own investment firm, Appaloosa Management, which he launched in 1993.

Tepper continued focusing on the bond markets and understanding complexity, putting together one of the best track records of any hedge fund manager.

Today, Appaloosa manages nearly $15 billion, and Tepper is reportedly worth over $21 billion. He also happens to be the principal owner of the NFL’s Carolina Panthers.

Many of his modern colleagues are not very vocal about their investing, but Tepper has some great quotes. We share those with you here…

We often talk about how important it is to understand what type of market you are currently operating in.

While there are elements of every strategy that work in every type of market environment, your plan needs to be refined to the kind of market RIGHT NOW.

What works in a BULL market is not necessarily what works in a BEAR market.

Getting it wrong can cost you a lot of money. Remember that one key is to stay in the game.

We talk about this often: Doing absolutely nothing is the most valuable tool you have as a trader and an investor.

99.9% of trading and investing opportunities are ones you should not be doing. Selectivity is the key to your eventual success.

Being patient is indeed one of the hardest things for any investor to do but also one of the most important.

This fits our favorite motto – "Trade the Plan, Plan the Trade."

One key to keeping your head when the market goes against you is having a plan that prepares you for any contingency.

If you are prepared, you have a much better chance of surviving—and thriving—in a tough market.

Just remember, you also need to execute the plan to succeed.

This outlook is one of the key elements of optimism.

People who are able to move on, learn from their mistakes, and not dwell on them are in a much better position to succeed.

Psychological “baggage” can weigh you – and your investment – returns down.

This just sounds like a lot of common sense. Something that very often is lacking in the markets.

There are no shortcuts to success. Another one of our mottos at HX Research is "Do the Work," and that is what Tepper is saying here.

Anyone can become a successful trader and investor if they are willing to put in the time and exhibit the discipline.

We hope that you’ve enjoyed this week’s issue of HX Weekly…