'Technical' Rally Right on Cue! GDP Pops (some history), Ex-Fedhead Panicking, Global Economy Surprising (in a not-good way), yada yada

Well, alas, technical difficulties did not allow me to post this week's video commentary, so I'll just give you the highlights.

But first, a quote:

“Whoever wishes to foresee the future must consult the past.”

Niccolò Machiavell

Starting with the technicals, here's the 1-year daily chart for the S&P 500... Like I said last week, we'll see some nice rallies off of technical support.

Today's was absolutely one of those rallies... The index bounced right off of its 50-day moving average, which was at the bottom target of a bear flag pattern, and right at the 38% retracement of the rally off of the low in April:

As for the Nasdaq 100, it's seen far more technical damage of late, but its decline halted dead on the 50% retracement of the rally from April:

A strong GDP print (like last quarter's) is, oddly, common, just ahead of recession.

Here's my chart going back to 1960 (and notes) , the circles catch those pops just ahead of recession:

And here's Peter Berezin on the same topic:

And here are my thoughts on ex-Fedhead Bill Dudley's 180 and why we should be careful what we ask for:

7/25/2024

Ex-Fedhead Bill Dudley just did an abrupt 180… He’d been firmly in the higher-for-longer (interest rates) camp until just this week, when he penned an op-ed urging the Fed to cut their benchmark rate at next week’s meeting, as suddenly he believes recession is close at hand.

Now, there’s been nothing in the pricing, nor in the Fed’s rhetoric to suggest that that’s going to happen, although, assuming the Fed sees what he is (and we are) seeing, the July meeting could bring an even stronger message that rates are on the cusp of being cut, perhaps at an accelerated pace than has been priced in up till now.

Question for investors therefore being, what would a more aggressively accommodative Fed mean for equities?

I’ve been making the case that as economic reality (weaker than expected) sets in, and, therefore, inflation further cools, that equities could indeed rally, but only briefly – as Wall Street (traders in general) is indeed begging for rate cuts.

Thing is, while a more sustainable move to the upside (per Wall Street's narrative) is no doubt plausible, you’ll want to be very careful with that narrative, particularly, per the red circles (capturing first rate cuts) ahead of red-shared areas below, if indeed recession looms.

White = Fed Funds Rate, Yellow = S&P 500 Index, Red-Shaded = Recessions:

The US economic surprise index continues to flash concerns, as does the one that captures the global economy:

PCE inflation came in hotter than expected for June, but tame enough to not reprice high odds of a September rate cut:

The notable selloff in copper is another potential harbinger of not-good economic conditions going forward:

The treasury yield curve typically steepens (from being inverted) just before recession starts.

It's steepening:

Stay tuned!