Markets higher. Fed signaling a pause. Inflation trending lower.
Seems good, right?
Everyone seems excited that the bear market is over.
Maybe it is. I sure as hell don’t know. My sense is that it is NOT over…but I refer back to the previous sentence.
Let’s look at some breadcrums.
The Nasdaq was up over 10% in the month of January.
The last time this happened was January 2001 after having just seen a significant contraction the year before.
The Nasdaq dropped more than 50% for the rest of 2001.
Something to ponder.
Let’s look at something else.
This is a chart of the 10 yr-3 mo yield spread. I know many don’t know what this means so I won’t go into it specifically.
However, here is what you need to know…
Whenever the spread between these two has been this negative…
…a recession has followed.
100% of the time.
The yield curve has never been wrong.
Just something to ponder.
These two points indicate the possibility that
we are headed into a recession
the stock market has not yet bottomed yet
There are many other indicators flashing the same.
On The Other Hand…
This ‘looming recession’ has been the most widely talked about and telegraphed recession in history. Everyone agrees we are either IN a recession…or that we will soon be in a recession.
Sometimes that’s when everyone is wrong.
Something to ponder.
Lastly…what are the charts saying?
Chart of the Nasdaq
The charts are saying something else as well. The daily chart of the Nasdaq (QQQ) seems to have broken out.
Fundamentally, it makes sense that markets go lower.
Technically speaking…the charts are telling a different story…
…for now.
Just some food for thought.
Now we wait and see.
Eric
PS - Apple (AAPL), Amazon (AMZN), and Google (GOOG) just released their earnings after hours today. All three missed on earnings. All three sold off after hours. Of special note = Apple has not missed on earnings relative to consensus in over seven years.
Let’s see how this plays out.