Follow-Through Rally Builds on Wednesday’s Late-Session Reversal
Right now we’re actually looking at a strong follow-through rally that initially began about an hour before yesterday’s close when Trump said he wasn’t going to impose tariffs on several key European allies that were supposed to begin on February 1, who failed to back his intention to obtain Greenland.
Trump also wrote on Truth Social that he and NATO Secretary General Mark Rutte have “formed the framework of a future deal with respect to Greenland.” Trump later elaborated to CNBC, saying that “we have a concept of a deal.”
S&P 500 Surges 1.2% as Investors Cheer Trump’s Unexpected Pivot
Investors were pleased with the unexpected developments late in the session with the benchmark S&P 500 Index rising 1.2% for the session along with similar performances in both the Dow and the Nasdaq Composite. The news didn’t actually put the low in for the day, that took place near the opening when Trump said in a speech at Davos, Switzerland that he would not use military force to take control of Greenland.
Markets Eye Full Recovery by Friday Close Despite Weekly Losses
Although stocks are still in the red for the week after Monday’s “gap and go” sell-off, the momentum generated by the rebound is raising hopes that those losses will be erased by Friday’s close. Trump’s pivot may have come as a surprise to some investors, but the markets have gotten used to his style that they have dubbed the TACO trade, short for “Trump Always Chickens Out”.
The Profitable TACO Trade Pattern: Dips Followed by Relief Rallies
This pattern of market dips followed by relief rallies has proven to be very profitable, especially the move in April 2025. In my opinion, it’s not that he “chickens out”. I see a pattern where he presents his aggressive position, waits for a response, then finds common ground to make the deal work.
Whatever it’s called, it’s been working and has become a viable strategy for those seeking alpha versus the beta investors who simply buy and hold.