As clients and regular readers have no doubt noted, while the next leg of the current bear market (should there be one) will be characterized by declining corporate earnings amid notably weakening economic conditions, in our view the latter, in its early stages, will, ironically, very likely inspire a potentially not-small rally in stocks.
In today's chart of the S&P 500 below, I green X'd the moment the ISM Manufacturing Survey for October was released, and two spots during Fed Chair Powell's press conference:
As for the ISM survey, expectations had it coming in at 49, which just barely denotes contraction... The actual reading, however, was a surprisingly low 46.7, sending it (the manufacturing sector) deeper into recession territory...And, lo and behold, stocks immediately popped higher on the release -- validating our latest messaging herein.
As for that volatility around Powell's presser, when he came out of the gate with some tough talk on remaining vigilant, stocks bolted lower -- the market is desperate for the Fed to lighten up (not considering the conditions [and the earnings setup] that will actually make that happen) -- he then proceeded to celebrate the progress they've made thus far 😕, and to essentially not say anything to further upset the market applecart right here.
As I've pointed out in the last 3 video updates, the technicals were also pointing to pretty strong odds of a rally right here.
Stay tuned...
