Stocks jumped higher again this afternoon following a worse-than-expected Q2 GDP print, which showed that US GDP contracted by 0.9% last quarter. Dow-polled economists were anticipating 0.5% growth by comparison.
The US economy is now in recession according to the general definition of the word. But to Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell, it’s most certainly not.
“We cannot have a recession with such a strong jobs market,” Powell said.
We covered yesterday how the last three jobs reports have been “fake news.” Instead of real job gains, more Americans are taking on multiple jobs than ever before. This has led to a net increase in the number of payrolls.
But workers, according to the jobs report’s household survey, have been steadily falling since March. That’s not a good omen for the economy.
And today’s GDP report did little to convince investors that a recession would be avoided. As a result, the Fed is expected to capitulate and halt rate hikes by the end of the year. The market is only pricing in another 90 basis points (0.90%) of hikes for 2022.
Bulls obviously loved that and bought with both hands this afternoon.
Something to be wary of with the SPY trading well above the upper Bollinger Band (BB) is a reversal formation, like the one we saw last week when the SPY closed above and below the upper BB in consecutive daily candlesticks.
Had the low of the pair of candlesticks (yellow line) been taken out by 1%, the market would have triggered that reversal, potentially sparking a selloff.
Instead, the low was never taken out by a significant amount and stocks ran higher. Strong earnings from Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) this evening should see the general market punch even higher from here.
But keep an eye out for closes below the upper BB. Stocks are up big since mid-July. A selloff is eventually going to bring them lower.
But other stocks are just now gearing up for a rally. For example, General Mills (NYSE: GIS) recently bounced off support (blue line) and closed above its 10-day moving average.
GIS also set a higher low relative to the low of mid-June. The stochastic indicator suggests that GIS isn’t overbought just yet, either.
For those reasons, it might make sense to take GIS long with a trade trigger of $75.59, above today’s high, as the general market looks to soar again tomorrow.
