Market Daily Review: June 25/2020
From week to week, change seems to be the name of the game. From our last blog, there were some key U.S. economic data that helped shed new light for the opening of the economy. This week, the International Monetary Fund (IMF), has cut its economic forecast for 2020 and 2021.
The IMF declares that COVID-19 has caused an unprecedented decline in the global economy and that the 2020 contraction in economic activity will be at 4.9%. Interesting enough, global economic growth will however rebound in 2021 to 5.4%. This however is down 0.4% from April's forecast. For the U.S, IMF has the 2020 economic growth dropping at negative 8 percent.
The chart belows pretty much sums it up. The U.S economy as of 6/24/202 has been downgraded by the IMF. China seems to be the only economy that stands to have any growth for 2020.
| AREA | 2020 GROWTH PROJECTION (%) | DIFFERENCE FROM APRIL WEO (%) | 2021 GROWTH PROJECTION (%) | DIFFERENCE FROM APRIL WEO (%) |
| World output | -4.9 | -1.9 | 5.4 | -0.4 |
| U.S. | -8 | -2.1 | 4.5 | -0.2 |
| Euro Area | -10.2 | -2.7 | 6 | 1.3 |
| China | 1 | -0.2 | 8.2 | -1 |
| U.K. | -10.2 | -3.7 | 6.3 | 2.3 |
BullGap's Recession Index
Looking at BullGap's Recession Index (BRI), we can see that it is currently sitting at 202.89. Historically, our recession index has predicted the start of a recession when the index has an elevation above 80 or more. It has hit this mark in mid-March 2020. BRI is a composite of monthly and weekly economic data points pulled from consumer index, unemployment insurance, adjusted income, manufacturing, housing start, and many other factors
Labor Market
For the U.S Labor Market, which shows the seasonally adjusted insured unemployment rate, the data shows the massive size in layoffs. Though it did decrease 0.5 percent from the prior week, the damaging is telling. Over 20 million Americans are out of work.
Encouraging Signs?
According to Continued Claims, the number of workers continuing to receive unemployment insurance has decreased this week. Down almost a million points from 20.3 million to 19.5 million. Since the high of 24 million in May 2020, it has been decreasing slowly as people start their way back to work.
Market In Review
From week to week, if change is the name of the game for the U.S economy - then daily changes is what is currently driving the market. Yesterday, everything was in a sea of red. Today, all major indexes are up. Gold is seeing a topping and bonds edge so slightly up.
Consolidation
For the past few weeks, the market has been in consolidation. Since the March lows, SPY has not been able to reclaim its high of 322.39. Likewise, S&P 500 has stalled out on trying to surpass 3,155. That was back on June 10. Since then, it has been tug-o-war between the bulls and the bears. In fact, the indexes have stalled out on multiple occasions at the technical resistance line of 3,155. If the broader market is to trend higher, it will need to break out in the next month or so to send the index into the post-coronavirus highs. A failure could easily send the indexes sharply lower.
Though the weekly technical readings for all major indexes are still in an uptrend, there is technical weakness showing in the derivative oscillator, price percent oscillator\MACD and the BullGap's Market Momentum Timer. The daily readings for SPY, QQQ, DIJA, and IWM are posting a bearish signal. The Bulls do have a re-test coming early next week as the 50-dma and 200-dma show short-term support. Is this the Bull's last stand?