By Tomorrow Stocks Rebound: Will a Hard and Clever Regression Come?

Migraines, anxiety, depression – these are the effects of stock market disasters like Friday’s. However, usually when there are these psychological consequences, we are already at the end of the infernal run. This is the case today for two reasons:

  1. The first is trivial: we are at an exceptionally strong second bearish bar and today we will have the third bearish bar. The markets are moving in waves of 3, so today we can already see the end at least at the close.

  2. Markets don’t think of precise data but rather of areas or steps. And inside the area we have noise or a little downhill that doesn’t change the image. We’ve always said the landing area is around 23,000 or rather just over 23,000 from Ftse All Share, and here we’re expecting prices to hit sooner or later. So if today we see a drop to 23,000 in FTSE All Share, we will see our forecast complete.

The different talk is if the market is in an uptick of volatility also splits the 23,000 support to head further lower. This will open up a more disturbing scenario but before we bind our heads we wait to break it.

To understand the reason for this situation, we need to look at the aggregate data. I understand that readers are often confused when you talk to them about the macro data in stock market commentary, but that’s what fuels the markets.

The macro picture of the economies of developed countries is that of expansion. It is true that we had a negative quarter in the US but expectations are that there will not be a second. In any case, we are talking about -1.5% when in the previous year the US economy was simply moving. The Italian economy is heading towards 2.2% of annual GDP in 2022 while the GDP trend for the first quarter of 2022 is +5.8%. A reader wrote to me: “Am I dreaming or am I awake? We have embarrassing shifts in my sector (ceramic tiles) and I wonder if it won’t end up at the level sooner or later.” And the effect of growth is inflation, the second step, which in the face of everyone who says It’s transient We’ll double the number at the end of the year. And again, step three, interest rates are flying higher and the ECB is forced to turn off the taps of quantitative easing. The Fed meets on Tuesday and Wednesday and we may have a 0.50 rate hike, and what we’ve seen in Europe Last week we will see it on Wednesday in the United States.

We’ve written a trivia so far. But what the markets are wondering is whether a rate hike will be able to cure the economic fever of inflation without necessarily affecting growth. So growth is supposed to continue, especially in the US despite the rate hike. Unemployment figures in the US are shocking because the economy continues to create jobs and this is a factor that contributes to higher prices.

And here we go back to the previous speech: As long as the US indicators do not point to new lows and as long as we stay above 23000 from Ftse All Share, we are in a framework that does not worry the markets and therefore we do not have to worry either.

Suppose at the cyclical level all of this has already been discounted and we see it by the number of descending sequencing setups on the 10 year monthly yield BTP that I post below and bullish sequencing setups on BTP. Cyclic indicators (to learn more, watch this video on my youtube channel ) They tell us that it cannot rain forever, and the longer it rains, the easier it will be for her to return to peace:

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