A rather surprising activist turn in U.S. foreign policy stirred up Wall Street and global politics, in the past two weeks. The Syrian missile attacks were followed by significant moves against the North Korean regime, and heavy attacks against the positions of ISIS in Afghanistan. Safe-haven assets rocketed higher during the week, with both the Japanese Yen and gold hitting new 5-month highs in the process. The holiday-shortened week saw the major indices drifting towards their monthly lows, and the Dow even closed the week at levels not seen since mid-February, amid the “flight to safety.” Mr. Trump’s decision to delay his tax cut plans also weighed on the market last week, as investors had high hopes for a quick and bold reform by the new administration.

Some really weak economic numbers came out on Good Friday, pushing futures even lower before the long weekend, as the CPI and retail sales reports both provided sizeable negative surprises. The PPI index also showed weakness earlier on, with only the decent Consumer Sentiment Index and the weekly new jobless claims number balancing the bearish picture. Consumption numbers have been notably diverging from the positive sentiment measures in recent weeks, but the Gorilla hopes that this is only a temporary blip in spending, and the healthy employment and wage growth figures will translate into more encouraging numbers soon.

The short-term technical picture got gloomier for the major indices, as they all dipped below their 50-day moving averages toward the end of the week. However, the 200-day averages are still well below the current levels. The Dow has been the weakest of the benchmarks lately, while the Nasdaq and the S&P 500 held up well in the strong political headwind. Small caps took a nosedive after a few bullish sessions, and the Russell 2000 remained below its short-term average, while the long-term indicator is also closing in on the benchmark. The Volatility Index (VIX) reflected the fear that took hold of traders recently, as it rose significantly all week long and finished the period at 16; the highest level since November.

Market internals also deteriorated slightly amid the broad correction, but most of the key measures are still well in bull market territory. The Advance/Decline pulled back from its recent new high, but it still shows a sizeable bullish divergence that is a promising sign for bulls. Declining issues outnumbered advancing stocks last week, by a 2 -to-1 ratio on the NYSE and by a 3-to-2 ratio on the Nasdaq. The average number of new 52-week highs was encouragingly stable, as it rose to 79 on the NYSE, while declining to 59 on the Nasdaq. The number of new lows actually declined, falling to 15 on the NYSE and 40 on the Nasdaq. The ratio of stocks above their 200-day moving average declined somewhat, but it remained steady compared to the movements of the indices, finishing the week at 67%.

Short interest bounced higher from its record low, as stocks retreated from their highs in the past couple of weeks, but bears are still in virtual hibernation by all historical standards. Shorts of Straight Path Communications (STRP) had a disastrous week, as AT&T (T) announced the acquisition of the company with an almost 200% premium, at a time when short interest was at 52%. Another short squeeze candidate, Lannett (LCI) still sports a short interest of 53%, despite the more than 30% rise in the stock in April alone. Digital Realty (DLR) marched to a new all-time high despite the correction, as it’s now the runner-up on the list of the stocks with the highest days-to-cover ratio (DTC), with a reading of 13. CenturyLink (CTL) continued to burn shorts for another week, and it now has 15 positive sessions in a row with a DTC ratio of 11.

Treasuries are experiencing a “stealth” rally under the radar, as “hard” economic data has been relatively weak recently, pushing rate hike odds gradually lower. The President’s surprising turn on interest rates on Wednesday, together with the hints on the possibility of a second term for Fed Chair Janet Yellen, also boosted bonds, while shaking the rally in the dollar. The dovish change in Trump’s rhetoric could prove crucial in the coming months, especially if the Fed needs to deal with more economic weakness. The housing market and manufacturing will be in focus this week, with building permits, housing starts, and industrial production growth being released on Tuesday, and the Philly Fed index coming out on Thursday. Volatility is likely to stay high until the current geopolitical tensions ease somewhat, so keep your seatbelts fastened. Stay tuned!