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7/29/22 A Recession By Any Other Name

News:

Yesterday markets opened on a weak note, with good reason too.

  • New unemployment claims were above 250,000 for the second week in a row.
  • Preliminary GDP numbers met a technical definition of a recession.

Let’s cut through the crap … Recessions are more complicated than a single number. And by the time a recession is officially declared, it’s often over.


Photo by MART PRODUCTION from Pexels

Plus, the stock market is forward-looking … And the market has already priced in a recession.

Here’s some historical context…

  • In December 2007, the Great Recession began.
  • In December 2008, the National Bureau of Economic Research declared a recession.
  • In March 2009, the stock market bottomed.

Just bear in mind the situation in 2008 was much worse than the current economy.

Market Recap

All four indexes rallied more than 1% each by the end of the day.

The Russell 2000 outperformed with a gain of 1.3%. 

10 of 11 sectors ended the day with gains. Real Estate (XLRE) and Utilities (XLU) led with gains of more than 3.5% each.

The lone red sector was Communications (XLC) which was dragged down by Meta Platforms (META).

  • META fell over 5% after reporting lousy earnings.
  • The reinvention of the social media giant is hitting snags.

From Washington With Love

Investors were keeping close tabs on the Senate as new developments rippled through the market.


Photo by Pixabay from Pexels

  • Early hearings are setting the stage for cannabis legalization.
  • The CHIPS+ bill passed both chambers of congress and has been sent to the President for a signature.
    • The bill includes $52 billion to increase the domestic production of computer chips.
  • Democrats revived a bill that included “$430 billion in new spending on energy, electric vehicle credits and health insurance.”

Green energy stocks surged higher after news of the historic deal broke.

  • Sunrun (RUN) +30%
  • Plug Power (PLUG) +25%
  • First Solar (FSLR) +15%

Prices We’re Watching

Amazon’s (AMZN) stock is up more than 12% in premarket trading. 

  • The company reported blowout earnings 
  • If the gains hold, it will add $150 billion in market cap.

Bitcoin^ is trading above $24,000 this morning.

  • This is the highest level it traded at since mid-June
  • There’s resistance from mid-May at $26,000.

Technicals:

The market is nearing overbought conditions, as shown on the chart below.


SPY Daily Candles – Chart via thinkorswim

March was the last time we saw this much strength in the RSI levels.

  • The VIX continued to fall. It’s below 22 this morning, a new low for the summer.
  • The put-to-call ratio is in an oversold state again.

Based on all these readings, a small pullback is in order. We just can’t say when it will happen.

Timing:

It’s the final trading day of July.

August is not a particularly great month for stocks. In midterm years the average return for the market is negative.

We’ll have an August outlook for you on Monday.

Have a great weekend!

Watchlist:

*Low Float
^Open Position

*VRAX has support at $20
*JAKK is on watch
*HKD is on watch
ECBK is on watch
SMR has support at $13
^CBIO has resistance at $1.80
TH has support at $13, resistance at $14
PBTS has resistance at $1.50
PGY is on watch
SIGA is on watch
CELH support at $80
RYTM has support at $12
NCNA has resistance at $2
VUZI has support at $7.50
ENPH is on watch
EDU has support at $25
ARRY has support at $15
CSGP has resistance at $70
PLUG has support at $20

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