“This is a very normal action and very technical in nature after a shock period,” said Truist’s Keith Lerner. “The market is extremely oversold, and markets don’t move in a linear fashion.”

Lerner noted that historic market rebounds tend to be clustered in with massive declines, as investors with FOMO worry they could miss out on a rally.

“In a period of uncertainty, each bit of new information is overextrapolated, which leads to wider-than-normal-swings,” Lerner added.

That explains why a bit of fake news Monday that Trump was considering a tariffs pause — immediately batted down by the White House — sent stocks temporarily surging. That gave markets a taste for what could happen if some nations begin to make progress in negotiating lower tariffs.

“Yesterday market players saw how the hint of ‘good news’ — in that case it was chatter about a pause in the Liberation Day tariffs — could rally markets by whole percentage points very quickly,” Michael Block of Third Seven Capital said in a note to investors. “Even though that proved to be all smoke, traders are now poised for the fire – that is, real news.”

Markets were coiled for a rebound

Investors have been on edge for any updates from the White House that might signal Trump is negotiating his trade policy.

White House National Economic Council Director Kevin Hassett said Tuesday on Fox News that the administration is managing “a massive number of requests for negotiations” from nations and that Trump is prioritizing “two of our closest allies and trading partners,” Japan and South Korea.

Earlier on Tuesday, Trump posted on social media that he had “a great call with the Acting President of South Korea.” On Monday, Trump spoke with Japan’s Prime Minister Shigeru Ishiba, who will be sending a team to visit Washington to negotiate a trade deal.

“(Traders) are peeking around every corner looking for even the slightest whiff of a trade deal or movement on the tariff front,” said Jamie Cox, managing director at Harris Financial group. “The market is wound up for a face-ripping rally.”

Across the Atlantic, The European Union’s executive arm said the bloc is prepared to negotiate with the United States over buying more of its liquefied natural gas. It’s a response to a grievance raised Trump, who has said the EU must buy around $350 billion worth of American LNG to compensate for the deficit the US has in goods trade with the bloc.

US Trade Representative Jamieson Greer said Tuesday during a routine hearing before the Senate Finance Committee that the administration is in talks with about 50 countries and that they’re trying to address some non-tariff related measures, such as foreign countries’ regulations that impede US exports.

Greer reaffirmed that Trump’s massive reciprocal tariffs will go into effect Wednesday.

“We will have the president’s plan go into effect, and we’re coupling that with immediate negotiations with our partners,” he said.

High-stakes game of chicken

Markets tried to rebound Tuesday before sliding. It’s a reminder that there’s no guarantee stocks will remain buoyant.

After imposing across-the-board 10% tariffs on virtually all products coming into the United States Saturday, the Trump administration is set to impose significantly steeper levies still on dozens of countries. Those tariffs, which Trump has called “reciprocal,” although they are no such thing , amount to as much as 50% for a handful of countries.

China’s Commerce Ministry on Tuesday said the country would “ fight to the end” of the trade war and would continue to stand up to Trump.

The escalating trade war between the two largest economies is turning into a high-stakes game of chicken. China has squashed deals that Trump wants — including a US company taking control of ports on both sides of the Panama Canal and a deal to sell TikTok to a US-based company. Both countries’ economies would be hurt in a trade war — and given the massive trade imbalance with the United States, China could very well be hurt worse.

So investors hopeful for a deal may not get one. And if they don’t, a damaging trade war could bring down both economies — and markets along with them.

Recession fears

Any escalation of the trade war would probably lead to a US and global recession this year, multiple Wall Street banks have said over the course of the past week, including Goldman Sachs and JPMorgan Chase. That could continue to sap demand for stocks.

Although the current bounce back may be short-lived, some in the Trump administration were already declaring victory.

“It’s finding the bottom now. It’s finding the bottom now,” Trump’s top trade adviser Peter Navarro said about the market Monday evening on Fox News. “It’s going to shift over and it’s going to be companies in the S&P 500 who are the first to produce here. Those are the ones going to lead to recovery. And it’s going to happen. Dow 50,000. I guarantee that and I guarantee no recession.”

Navarro’s optimism wasn’t matched by JPMorgan Chase CEO Jamie Dimon , who warned in his annual letter to shareholders Monday that Trump’s tariffs would raise prices, slow the global economy and weaken America’s standing in the world by tearing up its alliances. Even some of Trump’s allies, including Elon Musk and Bill Ackman , have recently warned that tariffs are bad policy that rely on extremely flawed logic.

CNN’s Phil Mattingly, Bryan Mena, Elisabeth Buchwald, James Frater, Anna Cooban and Juliana Liu contributed to this report.

For more CNN news and newsletters create an account at CNN.com