HX Weekly: April 7 - April 11, 2025

Hello reader, welcome to the second 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 1^st . Check out our Signal Trader Pro site here if you haven't seen it.

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 – It’s Time to Get Tactical

As we all know by now, on Wednesday, President Trump announced a slate of universal tariffs that were far more aggressive than anybody anticipated.

Wow!

This has been a crazy week in the markets—a historically crazy week.

On Wednesday, Wall Street rallied to a record one-day points increase after President Trump announced a 90-day pause on implementing a new tariff regime except for China.

In fact, by the end of the trading day on April 9:

• The S&P 500 was up 474.13 points, or 9.5%, its biggest percentage rise since March 2020.

• The Nasdaq Composite rose 1,857.06 points or 12.2%, the biggest percentage gain since January 2002.

• The Dow Jones industrial average finished up 2,962.86 points, or 7.9%.

This trading action came after a rapid decline in the market the previous week. In fact, between Thursday, April 3, and Friday, April 4, 2025, the three major U.S. stock indices experienced historic declines:​

• The S&P 500 fell 10.5%, marking the fourth-largest two-day drop since World War II. ​

• The Dow Jones Industrial Average declined over 300 points during the same period. ​

• The Nasdaq Composite entered a bear market, indicating a decline of 20% or more from recent highs. ​

So yeah, we just lived through market history twice in less than a week.

As we write this on Thursday afternoon, the indices are experiencing another major decline, with each down by over 5%.

What’s clear is twofold…

First, the stock market uptrend that we’ve been in is broken. Only time will if we’ve entered a period of consolidation or a new downtrend.

Second, the tariffs and reactions to them are generating a tremendous amount of market volatility.

That said, when there is chaos in the markets, it’s important to take a deep breath and remember that this is not the first time or the last time the markets have experienced choppy waters.

To study history is to know that the stock market’s largest single-day moves higher have all happened during these violent phases of volatility.

Thus, the market moves we witnessed on Wednesday are not unique, as evidenced in a post on X by Enrique Abeyta.

As you can see in the chart above, extreme up days are often immediately followed by big down days. So the market chaos that we're going through is, in fact, the norm.

And within chaos, there is an opportunity to make outsized returns.

So, it’s time to get tactical and make some money…

Whether you are fully or partially invested or 100% in cash on the sidelines, the time for action is now!

Moving forward, until the market establishes a new trend, we recommend employing the “3.5% rule”.

To apply this rule to your trading, divide your trading portfolio into several equal portions—say, six to eight "units."

On any day the S&P 500 drops by -3.5% or more, you use one "unit" to buy. On any day the market rises by +3.5% or more, you sell one "unit."

So, in the context of this week, on Wednesday, when the S&P spiked above +3.5%, you should have sold one "unit" of your trading portfolio to lock in some gains. On the contrary, when the market was down over -3.5% on Thursday, you would have bought a "unit."

If you have a more extensive portfolio, with maybe twenty holdings, you could double down on selling "units" on up days. Stick to buying one "unit" on down days, however.

The goal of the "3.5%" rule is to be systematic about your trading and remove emotion from the process. This type of tactical trading would have worked in every historical situation highlighted in the chart above.

No matter your current situation, aim to get to 30% to 50% invested as your base. Remember, we always want to have some cash on hand so we can act quickly should other opportunities arise.

So traders, it's time to lock in, pay attention to the market and make some money!

II: HX Daily Redux – The System Is Rigged

Today, we’ll revisit an HX Daily post from February 14 of last year titled "The System is Rigged!”

Given the events of this past week, we felt re-running this piece was especially important.

Many questions linger after the market's historic tariff news-driven rally on Wednesday. Questions like:

•  Was the President’s social media post that morning a tip to insiders to begin buying?

• Did the President reverse course on the tariffs because of the bond market, or did something else happen

• As Founder of Tolou Capital Management, Spencer Hakimian posited in his post on X - who knew about the tariff pause and when?

So, while our original post from last February focused on the mini-banking crisis the previous year, the core message is still as meaningful.

That simple message is:

“The system is rigged!”

This is something you may have heard in a lot of financial newsletters or on social media.

It's a common belief that the U.S. economy and financial markets are "rigged" to the advantage of large institutions and wealthy people.

While we don't consider ourselves conspiracy theorists at HX Research, we do think the system is rigged – to sustain itself and survive.

While a perfectly "free" market has a certain amount of logical appeal, its reality is much more complicated, primarily due to the emotions and psychology of the human beings that make up the system.

What we are seeing right now are the efforts by financial authorities and governments to "slow down" the effect of the banking chaos.

They've been tasked to do this, and they do a pretty darn good job of it.

One analogy I like to use about what's happening is comparing it to a house on fire in a neighborhood.

Let's say the neighborhood is an older development and could use some repairs, and it's been a pretty dry season.

One day, one of the houses catches on fire. The house was probably a fire waiting to happen, but it could have been avoided with some upkeep. The owners just made a mistake. That mistake, combined with the house's condition, puts it aflame...

Many houses in the neighborhood are in similarly bad shape and packed pretty tight. So, a few other nearby homes burn down within a couple of hours.

Now, folks are beginning to panic!

The fire department showed up to fight the fire, but most of the firefighters were volunteers who lived in this neighborhood.

This creates an issue. Most of the firefighters are more worried about their houses catching fire than fighting the existing fires. Their first inclination is to pack up their belongings and family and leave.

If they do this, though, they won't be around to fight the fire's spread, and it's a 100% certainty that their houses will burn down. That will put more houses in the neighborhood at risk, and if enough folks make the same decision, the entire neighborhood will burn.

At this point, the local government steps in to help. Officials let everyone know that even if their houses burn down, the government will build new ones.

Does the government have enough resources to rebuild every house in the neighborhood? Maybe, maybe not, but it doesn't matter.

It just needs to convince enough folks to stay put and fight the fire. So, let's get back to how the system is rigged...

The analogy above describes a "bank run." And the most important ones for the U.S. happened less than a century ago, during the Great Depression.

This led to the establishment of the Federal Deposit Insurance Corporation ("FDIC") in June 1933 to ensure depositors would get their money back from the bank (or, per our analogy, that their houses would get rebuilt).

Since then, we've added many layers of protection and tools for regulators. But at its core, a bank run is a crisis of confidence.

In our decades of investing, one thing has always been true: governments and regulators will do everything to ensure the system survives.

In our careers, we've seen the Mexico crisis (1995), the Thai baht collapse (1997), the collapse of Long-Term Capital Management (1998), the bursting of the technology bubble (2000 to 2003), and the global financial crisis (2007 to 2009 in the U.S.)... and every single time, governments and regulators have used their tools to address the situation.

In each situation above, we had a crisis of credit, leading to a crisis of confidence. Currently, we're seeing very little of the former (for now) and a lot of the latter.

And this week, we have a new, and for now unnamed crisis in April 2025. What happens from here is anybody's guess.

What we do know for sure is that we should always remember – the system is rigged to survive! 

III: Market Wizard’s Wisdom – Martin Zweig

Martin Zweig is one of the "Market Wizards" most influential in our trading and investing.

Zweig was a famed investor who attended the Wharton School at the University of Pennsylvania. He's widely known as a contributor to Barron's. But he's considered one of the greatest investors on Wall Street ever.

As we all attempt to process the historic market moves of the past week, we recalled a powerful Zweig quote and wanted to share it with you today.

If you've been with us for long, you'll recognize this as one of the core philosophies behind our approach to trading and investing.

The first place to start when thinking about his quote is that to make real money, you need real moves in a stock price.

A stock that goes back and forth and trades in a narrow range can be a great trading vehicle, but it's hard to make outsized returns. However, significant trends can last longer and go further than anyone ever expects.

The second thing to consider is taking advantage of the opportunities the market is giving you, not the ones you want it to provide. In other words, to make money in stocks, you need to find stocks that are moving.

In HX Trader, we primarily focus on two groups of trends. One of those is outside the scope of Zweig's comment. That's what we call "operational" trends. That is, keeping an eye on a company's operations across revenues, earnings, or other relevant metrics that investors pay attention to.

We like to find companies with consistent track records of growing these metrics and exceeding investor expectations. In my experience, this combination – growth and beating expectations – produces superior stock performance.

Management teams with long track records of outperformance are also likely to continue to outperform.

We combine this focus on operational trends with a view toward a stock's trend.

As a rule, we avoid trading stocks in a confirmed downtrend. We don't necessarily need to know why the stock is in a downtrend, and to be honest, we don't care.

A downtrend indicates that, for whatever reason, the stock market, in the aggregate, is not seeing enthusiastic demand for the shares—the reason why is irrelevant.

With thousands of liquid, publicly traded stocks out there, you should always be able to find tons in a confirmed uptrend. The uptrend tells us that the stock market is interested in the company and its stock, and typically, that interest is likely to continue.

Here's one last concept to think about with Zweig's quote: On the face of it, it sounds like a trading strategy. The reality is that following the trend is the best way to invest.

For investing strategies, we focus on stocks that we think can go up a lot. We don't mean 50% or 100%, but rather 300%... 500%... even 1,000%. You need to find stocks in major long-term uptrends to get those kinds of returns.

Like with trading and longer-term investing, we focus on stocks in uptrends and operational momentum. The best way to find a stock about to go up 1,000% is to find one where earnings per share are about to go up 1,000%.

That doesn't happen in a day, a week, or a month. It takes years. That means it takes some significant trends into account.

For avid traders, We recommend learning from Market Wizards like Zweig and incorporating their lessons into your approach to trading and investing.

IV: In Conclusion

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