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Recession

Is the Market Deluding Itself with a Soft Landing Fantasy?As markets surge against expectations, many are starting to believe that the impossible might unfold. The unusually low fund allocation to equities reflects a market sentiment plagued by fear, yet mega caps are continuing to rise against expectations, making some investors feel left behind. With GDP figures beating expectations and headline inflation plummeting, markets are now starting to believe the soft landing narrative. Can the Federal Reserve, after decades of economic engineering, finally dodge a recession? The bond market remains skeptical. When the yield curve inverted, everyone thought a recession was imminent. However, many overlook the lag between the onset of the inversion and an actual recession. Depending on historical context, a recession can either hit while the yield curve remains inverted or much later, once it has normalised. Thus, relying solely on the yield curve as a recession indicator can be misleading. Nevertheless, history has consistently shown that a recession follows the inversion at some point. However, the human psyche is notoriously impatient. If a predicted event doesn't manifest promptly, the market tends to discount its possibility. Remember, most people buy at tops and sell at bottoms. So, the real question isn't whether a recession will happen, but rather when. Why and When Could a Recession Happen? The Federal Reserve holds significant influence over this timeline. As long as interest rates hover around 5.5%, the recession clock ticks faster. With headline inflation plummeting (orange line) and inflation expectations paralleling this descent (blue line), we must understand what caused inflation initially to gauge where it's headed. The inflationary surge was mostly driven by the excessive expansion of the money supply. Examining the first derivative of the US money supply (M2) shows a rapid expansion followed by a subsequent decline. Comparing the growth rate of the money supply (yellow line) with the CPI year-over-year (orange line) reveals a 16-month lag. If this lag remains consistent, there's significant potential downside to inflation. Yet, the Fed continues to hike rates, despite projections of disinflation and deflation. This is because the Fed's job isn't to predict the future, but to respond to current data. Indicators showing a robust labor market and elevated Core PCE caution against prematurely reducing rates. It would be wise for the Fed to await signs of weakening in these indicators before contemplating rate cuts. This could potentially take a while to materialise, especially since unemployment doesn't seem poised to weaken in the immediate future. Unlike previous business cycles, the current situation stands out due to the Job Openings and Labor Turnover Survey (JOLTS) data. There remains a significant number of job openings for every unemployed individual. This bolsters the resilience of the labor market, making rate cuts less probable. Furthermore, the Core Personal Consumption Expenditure (PCE) - a lagging indicator - remains historically high and resilient. Powell has emphasised the Fed's intent to avoid repeating the same mistakes made in the '70s, suggesting we should expect higher rates for longer in order to permanently get Core PCE to 2%. He's also highlighted the relative ease of stimulating the economy out of a recession compared to raising rates, implying it might be more straightforward for the Fed to rein in Core PCE by inducing a recession. Similarly, the government can't afford the risk of the Fed raising rates later on. Considering the government's dependency on low-cost borrowing to manage interest payments on existing debts, higher future rates could pose a big challenge. Fortunately, the Fed uses the Reverse Repo (blue line) as a strategic tool to bypass any potential liquidity crisis until they are able to finance the government's balance sheet (orange line) with cheap debt once again. Given that interest expenses are nearing 1 trillion USD, the Fed will inevitably have to cut rates to zero and initiate Quantitative Easing (QE) in the future. Remember, the sole limitation to Keynesian economics is inflation. Hence, it's logical for the Fed to avoid risking a resurgence of inflation. In essence, a recession might be essential for the Fed's future assistance to the government. Deciphering the Stock Market's Puzzle Despite Powell's frequent emphasis on a 'higher for longer' stance, the market remains skeptical. This is alarming, especially as the full implications of a 5.5% rate haven't been fully experienced by the economy. Once they manifest, job openings will plummet, unemployment figures will surge, and the 'soft landing' illusion might crumble. Historically, such scenarios are common when real rates reach unsustainable levels. Fortunately for investors, there seems to be room for the AI bubble to continue. Markets typically peak about a month before a sustained increase in unemployment. Hence, forward-looking unemployment indicators like job openings, initial claims (blue line), and continued claims (orange line) are crucial for those wishing to divest before a potential market downturn. In the current scenario, it might be wise for investors to stay away from higher-risk assets like small caps and cryptocurrencies. Historically, these haven't performed as well as mega caps during liquidity crunches. Investors might want to reconsider taking on additional risks unless there's a sustained surge in global liquidity (yellow line). Conclusion: A Time for Caution and Opportunity In conclusion, even though a recession seems inevitable, mega caps may continue their upward trend until the labor market reveals signs of distress. Therefore, it's crucial for investors to closely watch leading unemployment indicators and central bank balance sheets to ensure they're well-positioned for both the upcoming market downturn and the subsequent recovery. Disclaimer: This article is intended for informational purposes only. It is not intended to be investment advice. Every investment and trading move involves risk, and you should conduct your own research when making a decision. Past performance is not indicative of future results.
NASDAQ:NDX
by ingeforberg
VIX - THE RECESSION INEVITABLE?The "VIX = Volatility Index S&P500" has predicted us in the last 3 decades, quite reliable possible "extreme movements". = Why in the next 2-years such an event could occur, we will take a closer look in the following article. WHAT IS THE VOLATILITY INDEX S&P500 = Expresses the expected range of fluctuation of the U.S. stock index S&P 500. = To determine volatility, it measures the distribution of options that run on these stocks. TABLE OF CONTENTS - 1st part = VIX - 2nd part = VIX PROPERTIES + USE - 3rd part = CURRENT SITUATION - 4th part = CONCLUSION PART ONE "PAST." If you compare the past of the "VIX" with the S&P500, you will notice that the - 36.47 - mark played / continues to play a very important role. Every time the "VIX" exceeded the - 36.47 -, there was extreme volatility in the S&P500 and other asset classes. PAST EXTREME MOVEMENTS . > 01.10.1998 > 01.10.2008 > 03/02/2020 (near crash) Why the VIX has such a big impact on the S&P500 and how we can actively factor this into our trading follows in part two. PART TWO "VIX CHARACTERISTICS" The "VIX" provides information on how serious fluctuations could be based on the option volume. = "VIX" goes up -> Statistically more likely that the S&P500 will fall. = "VIX" goes down -> Probably that the S&P500 gains slightly. Additionally, it can be noted that as soon as the "VIX" gets close to - 36.47 - many market participants take profits. WHY IS THIS SO? The market has already reached a "VERY VOLATILE point". > Price - FALLS - fast = SHORT positions will take profits > BUY > Price - RISES - fast = LONG positions will take profits > SELL CONSIDERATION OF "VIX" IN TRADING? "VIX" = Negative correlation to the S&P500 = "VIX" goes up = S&P500 goes down. = This negative correlation occurs because institutional investors use options to hedge against high volatility (hedge against stocks). RISING "VIX" = less liquidity in the stock markets + position reduction = stocks fall FALLING "VIX" = More liquidity in the equity markets + position building = equities rise PART THREE "CURRENT SITUATION" > The "CORONA crash" could not make a new HH in the "VIX", which is why this could still be pending at the current view. = 2020 the market "fell" "35.41%" in the SPX = 2008 the market "fell" "57.69%" in the SPX With the technical analysis, I come with the current constellation, to a higher "VIX" value than the 2008 reached. = which would mean a bigger sell-off. > Since 2018, we have been testing a "falling resistance line." = Similar resistance lines resulted in the past when broken, with significant volatility + movement in the S&P500 (= traditional markets). = The current resistance line has been respected several times, resulting in reactions. > The "rising resistance line" since 1990 + "the arc" + "the macroeconomic environment", suggest another "VIX" breakout . > The rising resistance line was tested at the two "extremes" - 01.10.1998 + 01.10.2008 - on. = this meant, both times, the temporary end of the extreme volatility = in 2020 we could not reach it, which additionally suggests another "breakout". > If the price trend continues to consider the direction of the arc, then this leads us to a much higher target than 2008 / ever before. PART FOUR CONCLUSION "If the VIX is high, then it's time to buy, if the VIX is slow, it's time to go" > Regardless of the outcome of the analysis, anyone who hasn't used the VIX before should now have gained a little insight. The future looks anything but bright for now, however we can use this time to learn and grow . The VIX could delay the final decision for another 2-years, which is certainly to the advantage of each of us. = Despite this still "long" period of time, a decision will be made in the future. > Let's discuss it in the comments and exchange our perspectives, your view on the whole thing would interest me "burning". If this idea and explanation has added value to you, I would greatly appreciate a review of it. Thank you and happy trading!
TVC:VIXLong
by ZielIstDieAutarkie
12
Stocks, Rates and Inflation: Assessing Risks and OpportunitiesOver the last year, there have been increasing concerns about threats to the US and global economies, mainly due to all the rate hikes from the Fed and other central banks. However, these fears have definitely not played out, as consumer spending and business hiring have shown surprising durability in the US, despite rate hikes and inflation. Several factors explain the stock rebound since mid-2022: - Bearish positioning left room for a short squeeze as negative expectations didn’t play out at all. Attention has returned to quality large-cap technology firms leading in AI development like Google and Microsoft, as their innovations promise productivity gains that support growth. - Ongoing passive investing inflows, corporate buybacks, past fiscal stimulus, and excess savings, the Fed and Treasury generating shadow liquidity, China and Japan keeping rates low and stimulating, the massive deficits of the US government (investors know the US is essentially ‘broke’). - Inflation coming down is also boosting stocks, as stocks are mainly valued based on inflation, not interest rates. - The Fed might have finished its hiking cycle or might have one last hike left. Current rate expectations are indicating that rate cuts will come by early 2024. While earnings seem to be plateauing from peak levels, profitability remains healthy overall. GDP growth remains positive and revised higher, the US economy keeps adding jobs and the unemployment rate remains at record lows. Global challenges persist, as supply chain disruptions and inflationary pressures from the Ukraine war might come back at any time, despite having significantly subsided. Demographic trends of aging populations in developed countries also drag on labor force expansion and economic growth. High debt loads worldwide likewise limit stimulus options without leading to inflation or instability. While inflation has moderated, it remains elevated and sensitive to many factors, from geopolitical instability to climate change. More concerning, inflation has eased without a clear link to the Fed’s policy tightening. It’s improbable that the Fed hikes were the ones that pushed inflation from 9.1% down to 3%, as rate hikes act with long and variable lags. This is raising doubts about the Fed, it's forecasting, and its monetary policy’s effectiveness in controlling inflation over the long term, especially as their current super-tight interest rate policy could lead to catastrophic deflation and recession. Given rising recession risks, the Fed will likely be forced to reverse course and start cutting rates by the end of 2024. This policy whiplash carries risks of its own, as we currently seem to be heading toward a deflationary shock, which might be followed by another inflationary wave. With massive deficits, the Fed also faces constraints from high-interest costs on debt even as its policies try to restrain growth and inflation. The economy isn't a simple dial the Fed can turn on and off. What’s even more concerning, is that the Fed is essentially trying to suppress wage gains and cause unemployment to curb inflation, which is something that could induce an inequality-worsening spiral. In our opinion, a more balanced approach recognizes that moderate wage growth won’t spur runaway inflation, especially as technology evolves work. The policy should prepare workers for automation and AI through training programs, not just reactively responding to lagging data as it is currently doing. The Fed’s constraints highlight the need for creative solutions to complement monetary policy. The economy is a multifaceted system requiring diverse policy responses. With vision and flexibility, emerging technologies like AI have immense potential to broadly uplift living standards. But this requires inclusive policies and acknowledging the economy's dynamism. The future likely holds turbulence, but with strategic foresight productivity gains can be harnessed for the benefit of all. Despite concerns over rising rates, the fundamental backdrop remains favorable for stocks. Many investors have grown excessively bearish and underestimate the market's upside potential. Sentiment and positioning remain bearish and cautious, with most investors underestimating all the positive headwinds for stocks, especially productivity gains from AI, falling inflation, falling rates, and currency debasement. Crucially, the rally since mid-2022 has not been fueled by leverage, unlike past bubbles. Margin debt levels decreased last year, reducing systemic risk. The market has a strong foundation to build on gains, especially as most unprofitable tech has been clobbered and hasn’t recovered, unlike US tech behemoths. Big tech and AI stocks are leading the way higher, forming a new monopoly built on network effects and immense scale. Their nearly unassailable competitive advantages will drive growth for years to come. Although in the short-term sentiment has turned bullish, hence a 10% correction is possible, we don’t think that a new bear market is in the cards until stocks make new all-time highs. In conclusion, while risks remain, the US economy has proven resilient amid rate hikes and inflation. Productivity gains from AI innovations, coupled with prudent and flexible policymaking, can support continued growth and market gains if properly harnessed. Investors should look through short-term volatility and maintain a constructive long-term outlook.
TVC:DXY
by BitcoinMacro
Deciphering Divergent Signals The Complex Economic LandscapeThe global economy continues to face profound uncertainties in the wake of COVID-19's massive disruptions. For policymakers and business leaders, making sense of divergent signals on jobs, inflation, and growth remains imperative yet challenging. In the United States, inflation pressures appear to be moderately easing after surging to 40-year highs in 2022. The annual Consumer Price Index (CPI) declined to 3% in June from the prior peak of 9.1%. Plunging gasoline and used car prices provided some consumer relief, while housing and food costs remained worryingly elevated. Core CPI, excluding food and energy, dipped to 4.8% but persists well above the Fed’s 2% target. Supply chain improvements, waning pandemic demand spikes, and the strong dollar making imports cheaper all helped cool inflation. However, risks abound that high prices become entrenched with tight labor markets still buoying wages. Major central banks responded with substantial interest rate hikes to reduce demand, but the full economic drag likely remains unseen. Further supply shocks from geopolitics or weather could also reignite commodity inflation. While the direction seems promising, the Fed vows ongoing vigilance and further tightening until inflation durably falls to acceptable levels. The path back to price stability will be bumpy. Yet even amidst surging inflation, the US labor market showed resilience through 2022. Employers added over 4 million jobs, driving unemployment down to 3.5%, matching pre-pandemic lows. This simultaneous inflation and job growth confounds historical norms where Fed tightening swiftly slows hiring. Pandemic-era stimulus and savings initially cushioned households from rate hikes, sustaining consumer demand. Early retirements, long COVID disabilities, caregiving needs, and possibly a cultural rethinking of work also constricted labor supply. With fewer jobseekers available, businesses retained and attracted talent by lifting pay, leading to nominal wage growth even outpacing inflation for some months. However, the labor market's anomalous buoyancy shows growing fragility. Job openings plunged over 20% since March, tech and housing layoffs multiplied, and wage growth decelerated – all signals of softening demand as higher rates bite. Most economists expect outright job losses in coming months as the Fed induces a deliberate recession to conquer inflation. Outside the US, other economies show similar labor market resilience assisted by generous pandemic supports. But with emergency stimulus now depleted, Europe especially looks vulnerable. Energy and food inflation strain household budgets as rising rates threaten economies already flirting with recession. Surveys show consumer confidence nosediving across European markets. With less policy space, job losses may mount faster overseas if slowdowns worsen. Meanwhile, Mexico’s economy and currency proved surprisingly robust. Peso strength reflects Mexico’s expanding manufacturing exports, especially autos, amid US attempts to nearshore production and diversify from China reliance. Remittances from Mexican immigrants also reached new highs, supporting domestic demand. However, complex immigration issues continue challenging US-Mexico ties. The pandemic undoubtedly accelerated pre-existing workforce transformations. Millions older employees permanently retired. Younger cohorts increasingly spurn traditional career ladders, cobbling together gig work and passion projects. Remote technology facilitated this cultural shift toward customized careers and lifestyle priorities. Many posit these preferences will now permanently reshape labor markets. Employers clinging to old norms of in-office inflexibility may struggle to hire and retain talent, especially younger workers. Tighter immigration restrictions also constrain domestic labor supply. At the same time, automation and artificial intelligence will transform productivity and skills demands. In this context, labor shortages could linger regardless of economic cycles. If realized, productivity enhancements from technology could support growth with fewer workers. But displacement risks require better policies around skills retraining, portable benefits, and income supports. Individuals must continually gain new capabilities to stay relevant. The days of lifelong stable employer relationships appear gone. For policymakers, balancing inflation control and labor health presents acute challenges. Achieving a soft landing that curtails price spikes without triggering mass unemployment hardly looks guaranteed. The Fed’s rapid tightening applies tremendous pressure to an economy still experiencing profound demographic, technological, and cultural realignments. With less room for stimulus, other central banks face even more daunting dilemmas. Premature efforts to rein in inflation could induce deep recessions and lasting scars. But failure to act also risks runaway prices that erode living standards and stability. There are no easy solutions with both scenarios carrying grave consequences. For business leaders, adjusting to emerging realities in workforce priorities and automation capabilities remains imperative. Companies that embrace flexible work options, prioritize pay equity, and intelligently integrate technologies will gain a competitive edge in accessing skills and talent. But transitions will inevitably be turbulent. On the whole, the global economy's trajectory looks cloudy. While the inflation fever appears to be modestly breaking, risks of resurgence remain as long as labor markets show tightness. But just as rising prices moderate, the delayed impacts from massive rate hikes threaten to extinguish job growth and demand. For workers, maintaining adaptability and skills development is mandatory to navigate gathering storms. Any Coming downturn may well play out differently than past recessions due to demographic shifts, cultural evolution, and automation. But with debt levels still stretched thin across sectors, the turbulence could yet prove intense. The path forward promises to be volatile and uneven amidst the lingering pandemic aftershocks. Navigating uncertainty remains imperative but challenging.
TVC:US10YEducation
by BitcoinMacro
5
Gold xauusd rate hike on 26 July and looming recession Dear Ziilllaatraders, A rate hike increases the interest rate in the country whose central bank implements it. This often leads to a stronger currency, in this case, the Dollar, as higher interest rates attract foreign investors seeking higher returns. As a result, the value of the Dollar may rise relative to other currencies, including gold. This could potentially put downward pressure on the XAUUSD price. But as we have seen after the NFP news, a significant bearish movement has unfolded, making me think that at the end of the month, we will see a bearish candle for the dollar and a bullish candle for XAUUSD. I will let you guys know what the future possible movements are. Furthermore, we have a looming recession last 2 years had a negative GDP which would suggest a recession is looming. Adding to this, the FED has released a probability chart where you can see that there is more chance of a rate decrease in March 2024. Good to know that we have some time before the highly possible recession. Conclusion: short-term retracement of DXY which will pressure XAUUSD down. After this DXY will probably continue the downtrend and so will gold move up to the 2000 levels. Greetings, Ziilllaatraders
OANDA:XAUUSDLong
by ZILATRADES
1
SP500 Black Swan Event Incoming!Following on from our alternative account which has now become our primary count we have cleaned up the chart and think we are very close to the top of this B wave, as retail traders and the media are turning bullish on the stock markets we think it's a matter of time before the rug is swept out from under the bulls feet and we come crashing down to our target of 3200. A 1300 point move from current prices! What could spark such a sharp move? China invading Taiwan? Inflation staying stickier than analysts expect? Moving into a negative growth environment? There are plenty of things that could spark this move, what it will be is anyones guess. All we know is if our analysis is correct this move will be very sharp and catch a lot of people off guard.
CME_MINI:ES1!Short
by RAA_Trading
1
PPI Good News on Inflation Bad News on Recession?S&P 500 INDEX MODEL TRADING PLANS for THU. 07/13 The softer than expected PPI on the top of yesterday's softer inflation numbers are likely going to stoke the "Half Full, Half Empty" debate to a higher pitch. The die-hard bulls would like to see it as an indication of the coveted "soft landing", while the die-hard bears would like to cast this as an indication of potential recession ahead. The next question that needs to be answered to resolve this debate in one way or another: is the softening inflation going to impact earnings numbers? We will start getting a glimpse into this starting from tomorrow. If early earnings show any unexpected weakness ("unexpected" is the key word there), then we might have seen an interim top; but, if the earnings appear to be on track or with a bias to the upside surprises then the next bull leg could get well entrenched. The previously stated level of 4500-4505 is the next area of resistance. Positional Trading Models: Our positional models indicate staying out of the markets until otherwise stated. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an index-tracking instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans: For today, our aggressive intraday models indicate going long on a break above 4507, 4491, 4467, or 4454 with a 8-point trailing stop, and going short on a break below 4497, 4486, 4478, or 4448 with a 9-point trailing stop.  Models indicate explicit long exits on a break below 4463, 4483, or 4504, and short exits on a break above 4483 or 4500. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 09:41am EST or later. By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention). To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals. (WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)  NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS: (i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s). (ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors. (iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk. #spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #earnings, #ppi
SP:SPX
by TradersAIDotCom
Fasten your seat belt, please.Hello investors. I repost and re-edit my chart multiple times to be updated. Take this one as long-term based on daily time frame. I think, crisis ain't done and the worst will come yet. We can spot a lot of similarities with 2008, when Bitcoin does not exist. It is on SP500 chart. To make is simple I let bars pattern in chart as an example: It would happen very soon, probably with start in this May ( traditional "Sell in May and go away" ). Don't read news if wave is done. This rally was suspicious from its beginning and only made Lehman formation. I don't expect much upsides - to be clear. I am just a passenger as you. So let's wait and see. My belt is fasten already ;-) With care always, Emvo.
COINBASE:BTCUSDShort
by Emvo10
15
Guide to Recession - What Is It? Recession is a scary word for any country An economic recession occurs when the economy shrinks. During recessions, even businesses close their doors. Even an individual can see these things with his own eyes: 1. People lose their jobs 2. Investment lose their value 3. Business suffers losses Note: The recession is part of an economic cycle. If you haven't read that article, you can check it below: What is the Recession? Two consecutive quarters of back-to-back declines in gross domestic product constitute a recession. The recession is followed by the peak phase. Even if a recession lasts only a few months, the economy will not reach its peak after serval years when it ends. Effect on supply & Demand - The demand for goods decreased due to expensive prices. Supply will keep increasing, and on the other hand, demand will begin to decline. That causes an "excess of supply" and will lead to falling in prices. A recession usually lasts for a short period, but it can be painful. Every recession has a different cause, but they have the main reason for the cause of the recession. What is depression? - A deep recession that persists for a long time eventually leads to depression. During a recession, the inflation rate goes down. How to avoid recession? 1. Monetary Policy - Cut interest rates - Quantitative easing - helicopter money 2: Fiscal policy - Tax Cut - Higher government spending 3: higher inflation target 4: Financial stability Unemployment : We know that companies are healthy in expansion, but there is a saying, "too much of anything can be good for nothing." During peak, The company is unable to earn the next marginal dollar. Companies are taking more risk and debt to reset the growth Not only companies but investors and debtors also invest in risky assets. Why does lay-off occur? After the peak phase, companies are unable to earn the next marginal dollar. Now, the business is no more profitable. CCompaniesstart to reduce their costs to enter into a profitable system. For example - Labour Now, Companies are working with fewer employees. Fewer employees must work more efficiently. Otherwise, they may be lay-off by the company too. You can imagine the workload and pressure. You may argue that they should leave the company! Really? Guys, we just discussed the employment rate declines. How will you get a job when there is no job? Now, you get it! Let's assume the effects of the recession on the common man: Condition 1: He may be laid off. Condition 2: Perhaps he will be forced to work longer hours. The company is unable to maintain a positive outlook. Fewer employees are doing more work due to massive lay-off. His wages decline, and he has no disposable income. As a result, consumption rates are reduced, resulting in lower inflation rates. A slowdown in the economy is caused by lower prices, which decrease profits, resulting in more job cuts. Four Causes of Recession: 1. Economic Shocks 2. Loss of Consumer 3. High-interest rates 4. Sudden stock market crash 1) Economic shocks - When there is an external or economic shock the country faces. For example, COVID-19, 2) Consumer confidence - Negative perception about the economy and the company from consumers who lack confidence in their spending power. Instead of spending, they will choose to save money. As there is no spending, there is no demand for goods and services. The absence of spending results in a lack of demand for goods and services. 3) High-interest rates - High-interest rates will reduce spending. Loans are expensive, so few people take them out. Consumer spending, auto sales, and the housing market will be affected. There can be no good demand if there is no lending. There will be a decline in production. 4) Sudden stock market crash - evade people's trust in the stock market. As a result, they do recall their money and emotion drives them crazy. It can also be considered a psychological factor. As a result, people will not spend money and GDP will decline. Consumer Spending: During the recession, consumers don’t have additional income called disposable income. Consumer spending parts -- Durable goods - Lasts for more than one year -- Non-durable goods - Lasts for less than one year -- Service - Accounting, legal, massage services, etc. Durable goods surfer during the recession. Non-durable goods are recession-proof because their day-to-day fundamentals are not affected by recessions. Let's take an example of two stocks, ABC Food vs ABC car But, will you stop buying food because of the recession? Will you reduce your consumption of toothpaste, bread, and milk? The answer is "NO". Consumers buy the same amount of food in good or bad times, On the other hand, consumers only trade in or trade off their car purchase when they are not only employed but optimistic about the safety of their jobs & confident that they could get a promotion or a high paid job with another employer. And People's disposable income is absorbed during the recession. Consumer spending is the crucial point to displacing recession. Auto sales: As we discussed, few people buy cars during a recession. New car sales count as economic growth. You may have heard about 0% loans. The company facilitates a 0% loan to increase auto sales. Mostly, people repair their cars or buy old cars during the recession. You may see a boost in the used car market and spare parts selling companies’ sales. Home sales/housing markets: I have a question now! Which is your biggest asset? Most of you will say, my home! New home sales are part of economic growth. Also, house price impact how wealthy consumer feel. Higher the home prices, the more they feel rich, and vice versa. When home prices are higher, consumers feel they are wealthy and they are willing to spend. But when house price declines, they reduce spending/consumption. If your biggest asset price declines, you don’t spend and the economy takes a longer time to recover. A higher rate stops increasing the home price because they have to pay more EMI. central bank reduces rates during the recession, and the housing market rate boosts because the loan/EMI is cheap. Interest rates: Generally, interest rates decline during a recession. Central banks cut interest rates that’s why loans become cheap. Benefits of Lower interest rates - - - Boost in the housing market. - - Increase sales of durable goods - - Boost in business investment - - Bonds and interest rates have an inverse relationship. An economic downturn tends to bring investors to bonds rather than stocks, which can perform well in a recession. - - During the recession, interest rates are lower and banks higher the criteria for getting loans, so that people can face the abstracts while lending money. Stock Market: I want to clarify that, the stock market is not an economy. The economic cycle is lagging behind the market cycle and sentiment cycle. It gives me a chill as a technical analyst and a sad moment as an economics lover. Sometimes it's ahead, and sometimes it's behind. Recession = bear market . Recession-Proof Industries: * Consumer staples * Guilty pleasures * Utilities * Healthcare * Information technology * Education I will write about this in the future, but for the time being, let's get back to technical analysis .
NASDAQ:MSFTEducation
by Money_Dictators
8
Recession Timeframe Horizon Macro Monday (2) Potential Recession Time Horizon Below you will find a breakdown of how many months pass before a confirmed Economic Recession (shaded grey areas) after the yield curves first definitive turn back up towards the 0% level: 1) 13 Months (Dec 1978 – Jan 1980) 2) 9 Months (Nov 1980 – July 1981) 3) 16 Months (Mar 1989 – Jul 1990) 4) 12 Months (Mar 2000 – Mar 2001) 5) 22 Months (Feb 2006 – Dec 2007) 6) 6 Months (Aug 2019 – Mar 2020) 7) 4 Months so far (Mar 2023 - ????) Average Time frame: 13 months (reasonable time horizon would be 6 – 18 months). I consider the first definitive turn up towards the 0% level as no. 7 on the chart (March 2023). Since this date we have rolled over below the -1% level (see additional chart in comments). March 2023 appears similar to the bounce in Dec 1978 (No. 1 in the chart), it also rolled over to the lower sub -1% level. If we assumed a similar 13 month timeframe to recession commencement as in Dec 1978 of 13 months, which also aligns with our 13 month average above, we would be looking at April 2024 for a recession to commence. Interestingly 1978 - 1980 was a similar peak inflationary period known as the Great Inflation, a defining macroeconomic period of high inflation. You might be wondering, has a recession ever occurred in the month of April before? I personally thought this was a strange month but it has occurred in the past. In April 1960 a recession commenced and lasted 10 months to February 1961. The 1960 recession was mainly a result of an over-tight monetary policy whereby the Federal Reserve raised interest rates from 1.75% in mid-1958 to 4% by the end of 1959 and maintained them at that level until June 1960. The Federal Reserves motive for raising interest rates and maintaining them was fear of high inflation (as in early 1951 inflation soared to +9.5%). Is it just me or is this all starting to sound a little too familiar? If we wanted to cater for all time scenarios in the chart and noted above (no. 1 - 6) we could argue that the start of a recession is possible at the earliest within 6 months (Sept 2023) and at the latest 22 months (Jan 2025). Also, the month of April 2024 has some eerie similarities to two prior recessions, the 1978 and 1960 Recessions. Lucky 13 Since World War 2 bear markets have on average taken about 13 months to reach their bottom and a further 26 months to recover their losses. Our average time before a recession would start is 13 months. It’s worth remembering that it could take an additional 13 months before a bottom is established and then 2 years or 26 months (2 x 13) of price action below the pre-recession price highs. Over 3 years is a long time to wait to recover losses. It would be pertinent to start deleveraging or increasing your hedge from the 6 month mark (Sept 2023 in this case) as subsequently the likelihood of a 3 year period below the Sept 2023 price levels increase as each month passes. For reference the S&P 500 index has fallen an average of 33% during bear markets over the avg. timeframe of 13 months to the bottom. I actually find it very hard to accept that a recession is possible in the near term (within 6 - 12 months) and I would in fact argue against it, however I cannot explain away the data in the chart which speaks for itself and warrants at least some consideration & caution. Nothing is a guarantee and maybe this time it will be different, especially factoring in the amount of unprecedented liquidity added to the market in recent years, sticky inflation and financial supports provided to systemically important banks. All the chart really indicates is a probable window for a recession to start some time between Sept 2023 – Jan 2025 and no guarantees. The rule of 13 is worth remembering, simply from a timing perspective (before and during a recession) as it may help your timing. Based on two similar periods in history, the 1978 and 1960 recessions suggest the month of April 2024 may be a key date. Again, no guarantees. It is also worth noting that for the last six recessions, on average, the announcement of when a recession started was up to 8 months after the fact…meaning we will have no direct indication when a recession starts, however the un-inversion of the yield curve (back above the 0% level) and a rise in unemployment will be the early tells, so these are worth paying attention too. We will keep you posted on any sudden changes in these metrics. I hope the chart is helpful, provides one perspective of which there are many, and can help time and frame the situation we currently find ourselves in. NO GAURANTEES, just probable timeframes that may be worth paying attention too. PUKA List of Recessions: 1. COVID-19 Recession (February - April 2020) 2. The Great Recession of 2008 (December 2007 - June 2009) 3. The September 11 Recession (March - November 2001) 4. The Gulf War Recession (July 1990 - March 1991) 5. The Iran/Energy Crisis Recession (July 1981 - November 1982) 6. The Energy Crisis Recession (January - July 1980) 7. The Nixon Recession (December 1969 - November 1970) 8. The “Rolling Adjustment” Recession (April 1960 - February 1961) 9. The Eisenhower Recession (August 1957 - April 1958) 10. The Post-Korean War Recession (July 1953 - May 1954)
FRED:T10Y2Y
by PukaCharts
5
GB10Y - UK pensions at risk? update. #BOE #recession"The Bank of England has hiked interest rates to 5 per cent in a further blow to homeowners struggling with spiralling mortgage costs. The rise, up from 4.5 per cent, is the sharpest increase since February – surprising economists who had been expecting a smaller increase of 0.25 percentage points – and sends interest rates to their highest level in 15 years! The move is set to deepen the mortgage crisis as borrowing costs rose for the 13th time in a row in an effort to curb inflation." *Fractal taken from 2007 high for the GB10Y - Gilt/Bond, reaching similar level's before reversing back down. I would expect the same to happen going forward. inflation is way above current interest rates, with the BOE stuck between banking crisis or a recession. I believe we'll see both! - Banking crisis, potential bail out's - expanding the currency supply further which will create more inflation! Pension's will continue too loose value, as bank of England will not be able to raise rates high enough to match inflation. "It comes as the rate of inflation remains unexpectedly stubborn – frozen at 8.7 per cent in May. Analysts had expected the Consumer Prices Index, which peaked at 11.1 per cent in October last year, to fall back to 8.4 per cent." What does this mean for the value of the pound? I'm actually expecting more strength in the GBP - purely from the weakness of the dollar. I would expect the fed to continue to pause now that inflation is finally dropping. FedNow expected to launch on the 1st of July, this will enable faster payment's and a surplus of dollars entering the markets if needed. again weaken's the purchasing power of the DXY - by adding more supply to the currency.
TVC:GB10YShort
by dibz1996
Yields are Yelling: Recession is comingIt looks like we are turning over. Coupled with gigantic short positioning of speculators on bonds (highest in history bsed on the COT Data), the chart indicates that yields will fall again. Why would they fall? Because of a flight to saftey and/or a recession. I am keeping it very simple, I just buy Bonds via ETF. I am long TLT, IEF and SHY. With that trade, I am also long USD, since my native currency is EUR. If we have a weekly close above 3,5% on the US10Y, I will exit my positions. It might also be lucrative to go short stocks now, but I wont do that too much. This might be a great trade, but I am viewing it as a set up for an even better one. We might get a great opportunity to buy stocks soon.
TVC:US10YShort
by Cyranus
2
🔥 FED Pauzing Interest Rates Is NOT BullishAs of a couple of minutes ago the FED has announced that they will pauze the interest rates and not hike any further. Since rising interest rates seems bearish for markets, a pauze is often a much more bearish signal. As seen on the lower chart, once the FED pauzes the hiking cycle ('flat mountain top'), it has often signaled a stock market crash in the not so distant future. With the most recent pauze, one would be cautious for the future at the very least. Do you think a stock market crash is coming? Share your thoughts🙏
SP:SPXShort
by FieryTrading
19
Signs for a looming recessionInvestigating the 2008 recession, with specific regards to Interest Rates and Inflation. We can observe a similar pattern occur here. Should history rhyme, we will see at least some more months of bullish price action before the top is set. From there, months of slow decline, before bearish acceleration kicks in - deflation. Correlative projection puts the top in April 2024, however I have reason to believe that it will happen earlier this time, sometime this year. Reason being, is that the dynamic is different. There is a lot more leverage and this isn't about a housing market. The USD is being ditched as world reserve currency. Generally, the price increases that we should see in the coming months, would pale in comparison to the price decreases that we will see later. Invest wisely, and stay safe.
SP:SPXShort
by Alien_Algorithms
Is tomorrow the day we predicted last year to be the market top?FOR THE FULL ANALYTICAL RIGOR THAT IS WORTH READING START HERE (otherwise skip to the section titled if you only care about the future “START HERE IF YOU SKIPPED THE TOP”) It has been a long year since we got the program working, calculating probabilities, and identifying where we likely were in time. Sometime early 2022, I realized what would happen if we took all S&P 500 price data, applied structured Elliott Wave Theory to it, identified the relationships between all macro and micro wave structures, and determined our current location in time to forecast future movement. By early July 2022, I realized if we completed SubMillennial wave 1--Grand Supercycle 5--Supercycle 1 in January 2022, then I could take prior wave relationships to forecast the 3 waves inside of Supercycle 2 based on the data from Supercycle wave 1. This forecast can be found here: It forecasted the bottom of the first wave down (Cycle wave A) to end around October 18, 2022, the top of the second wave up (Cycle wave B) to end around mid-July 2023, and the final bottom (Cycle wave C and Supercycle wave 2) likely in the first quarter of 2025. I would update my program every time I believed waves completed and re-calculate these points and the movement over the next few weeks to months. Feel free to head to my profile to view all ideas. A few reversal points did occur earlier or later than forecasted at higher and lower levels, but I learned the original forecasts were normally the most accurate. One of the key places I rushed a forecast was as we got closer to October 18th I had the bottom occurring later in the October or closer to November. This August 20, 2022 analysis had the levels and days for the bottom spot on, but I temporarily went a different way. The relational data was proving more and more accurate. The actual bottom in October was on the 13th instead of the first forecast of the 18th. I finally accepted the bottom by December 5, 2022, once I went back to review my older analysis. From there the program continued to call waves out well, with Primary wave A happening lower than expected but on the date as seen in the December 5th analysis above. Primary wave B was long and the internal wave C never broke below the initial wave A which was confusing, however Primary wave B was forecasted on December 6th to occur in the middle of March and sure enough it occurred on March 13, 2023 as seen below: But after this original forecasting from the program I continued to attempt to find Primary B in many places after a traditional ABC wave down which never came. Finally by March 2, I reviewed my original analysis and updated Primary wave B to end around March 14 and it ended March 13 as seen here: Upon completion of Primary wave B, I forecasted the market top and end of Primary wave C. The forecasted date was June 16th no higher than 4403.88 as seen here: After the completion of Minor wave 2 inside of Intermediate wave 1, I updated the market top to June 20th, based on Intermediate wave 1 likely lasting longer than initially expected when Minor wave 1 ran long as seen here: At this time I loosely placed Intermediate waves 1-5 in their projected locations as well. The market top was re-adjusted again back to June 16th on April 9th as seen here: Intermediate wave 2 was forecasted on April 17th as was spot on on April 26th here: Intermediate wave 3 was much longer than expected after gaining 33% of the expected gain in the first day followed by being slow and trading sideways at times too which is very abnormal of a wave 3. By May 7, I had backed the market top back up to July and then debt ceiling chaos broke out. With the debt ceiling resolved Intermediate wave 3 was still slowly moving. Then my program threw me for the biggest curveball I could not believe and thought it was an error. Intermediate wave 3 had finally wrapped up. All preceding waves to that point had been 12-25 days long. In my wisdom, Intermediate wave 4 would likely be in the middle of that range. The program urged it would only be 2 days AND only retrace 15.06% of Intermediate wave 3’s movement. I was skeptical but went with it and said it could last 4 days. Intermediate wave 4 lasted only 3 days and after I adjusted the Fibonacci tool retracement levels, 15.06% said the bottom would be at 4261.479 as seen here: The actual bottom was 4261.07. Finally on June 8, 2023 Ziggy spits out the plan for Intermediate wave 5 as seen here: START HERE IF YOU SKIPPED THE TOP The models are pointing for Intermediate wave 5 to last between 3-5 days with the likely top around 4393.93. I chose 4 days and around but not likely over 4400. After all the projections and models and recalculations over the past year we are here. Still around 4400 and back to mid-June. AND it’s Fed day with some high expectations of no hikes and word of a future cut in 2023. Elation should follow if this happens, but what else is going on. Inflation since 2021 is now around 16% and has increased every month since mid-2021. Wages for everyone have not increased even close to 16%. Mortgages are around 7%, not many people rushing to trade their 2% mortgage for a 7% mortgage now. Students with loan need to start paying the piper as they begin to accrue new interest again. Those that did not wisely save their payments and collect interest on that money over the past two years are about to give up some luxuries which means retailers and restaurants are will soon see declining sales. Chaos bound to rattle the 2024 Presidential tickets is just gaining steam with outcomes unknown. Meanwhile the VIX was at its lowest level since pre-COVID last Friday signaling complacency in an economy that continues to lay off workers. All the numbers are not moving synchronously in the proper directions which likely precedes market corrections. In this case, based on all the data, this is likely the major bear market I identified last year. I can always be wrong, or we can go up a little higher before correcting. But I have learned my lesson to trust the original analysis and that says the top is in. It would be smart to not repeat 2008 and watch your retirement accounts and 401Ks plummet 50% when you have the opportunity to do something about it today. Maybe move to cash or something with less exposure to major companies and indices or the G Fund for you government employees. You may not make much money and can always switch it up if the program is wrong, or you can save your retirement and sit out of the market for 14-18 months until we find the bottom. While others begin recovering and realize they need to pick up a second job or leave retirement for work again (Tom Brady might not mind) to survive, you could then ride the next major bull market up. Follow me if you would like to see where the models take us moving forward.
SP:SPXShort
by StockSignaler
3
Last Hurrah of the Bull, or the Next Leg Up? Day 3S&P 500 INDEX MODEL TRADING PLANS for WED. 06/07 The precarious rally of the last month has been baffling many, with the lack of the breadth in the rally was concentrated in just a handful of big-tech names. With the major news cycles in the rear view mirror, that red hot bull could be losing steam. If the rally does not dissipate this week, then it could be indicative of yet another leg up that could obliterate the shorts. As we first stated to start this week, if you are a bull, it may be prudent to take some profits off the table; if you are a bear, you may begin looking for entries. Positional Trading Models: Our positional models indicate opening a short on a break below 4275 with a hard stop at 4307. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans for WED. 06/07: For today, our aggressive intraday models indicate going long on a break above 4291, 4280, or 4268 with a 9-point trailing stop, and going short on a break below 4288, 4277, 4265, or 4250 with a 9-point trailing stop.  Models indicate explicit short exits on a break above 4255. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 11:16am ET or later. By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention). To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals. (WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)  NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS: (i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s). (ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors. (iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk. #spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #fomc, #fed, #fedspeak, #regionalbanks, #debtceiling, #china, #softlanding
SP:SPX
by TradersAIDotCom
What does a bull market look like?Sir John Templeton said: “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” Pessimism: Following the 2008 crisis, the global economy was engulfed in a cloud of pessimism. Investors were gripped by fear and uncertainty as financial institutions crumbled, economies contracted, and unemployment soared. Stock markets experienced significant declines, and investors became cautious, bracing themselves for further turbulence. This initial stage of pessimism laid the foundation for the birth of a new bull market. Skepticism: As the dust settled and economies started to stabilize, skepticism took hold. Investors remained cautious, wary of another downturn and skeptical about the sustainability of the recovery. However, as central banks and governments implemented unprecedented monetary and fiscal stimulus measures QE1,2 & 3, confidence began to slowly seep back into the markets. Gradually, investors started to see signs of improvement, albeit with a sense of skepticism. Optimism: The bull market gained momentum as skepticism transformed into optimism. Economic indicators started showing signs of recovery, corporate earnings improved, and investor sentiment shifted towards a more positive outlook. This stage witnessed increased buying activity, as investors sought to capitalize on the upward momentum. As the market continued to rally, optimism became the prevailing sentiment, driving prices higher. Euphoria: The final stage of a bull market is characterized by euphoria, a state of extreme excitement and irrational exuberance. During this phase, investors become overly optimistic, disregarding potential risks and buying into the market frenzy. This euphoria is often fueled by widespread media coverage and the fear of missing out (FOMO). In this stage, valuations may become detached from underlying fundamentals, leading to excessive speculation and a heightened risk of a market correction. Conclusion: Since the last cycle low established during the 2008 crisis, we have witnessed the birth and evolution of a remarkable bull market. From the depths of pessimism and fear, it grew through skepticism and optimism, ultimately reaching a state of euphoria. It is essential for investors to recognize these stages and exercise caution, especially during the euphoric phase when markets may be prone to excessive speculation and unsustainable valuations. While bull markets provide ample opportunities for wealth creation, it is crucial to remain vigilant and focus on long-term investment strategies that align with underlying fundamentals. By understanding the cyclical nature of bull markets, investors can navigate the ever-changing landscape of financial markets with greater confidence and resilience. Reference of Nasdaq: E-mini Nasdaq-100 & Opt Minimum fluctuation 0.25 index points = $5.00 Micro E-mini Nasdaq-100 Index & Opt Minimum fluctuation 0.25 index points = $0.50 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME_MINI:NQ1!Short
by konhow
DG has broken its downward trend, showing upward potential.DG recently broke through its downward trend and touched its support line to bounce off upwardly. DG has an inverse trend to the market due to its budget focused audience. During poor economies DG should rise. DG sold off quiet a bit as traders became optimistic about the markets conditions in early 2023 Lately new fears of recession are forming making DG a safer bet over tech sector. DG currently in the low end of its cycle make it good choice for upward momentum
NYSE:DGLong
by ratchet-mint
1