Daily Brief - ☀️ “How many times did the economy fall…”

TLDR:

Yesterday was a fun congressional hearing - if you held puts.

"How many times did the economy fail to fall into a recession after raising the unemployment rate by 1%, as you want to?" asked Senator Warren (edited for clarity).

“I think the number is zero.” replied Chairman Powell. To his credit, he did not try to run circles around the question and gave a straightforward answer.

The rest is history, as the market took a nose-dive and closed -1.53% down.

We highlight two takeaways from this.

First, it’s a range-bound market. We’ve been saying this over and over. Own equities when S&P 500 has a P/E above 17x at your own risk.

Second, the risk of a recession is still here. Powell can hike the front-end but the back end seems anchored and 10y US Treasuries are looking more and more attractive.

What stocks are doing well today?

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TOGGLE Leading Indicators: So it was a dead cat bounce…

And now we’re in limbo. Indicators are all neutral, so let’s watch where the market goes.

One would be tempted to buy straddles, but our VIX Valuation indicator is showing vols are expensive.

• ⬜TLI: flashed red again last week, and is now turning towards positive
• ⬜ Rangefinder Index: flirted with the bullish threshold but reverted
• ⬜ Peak Probability Indicator: flirting with an anti-peak (i.e. a trough)
• ⬜ Trough Probability Indicator: There comes the first bullish signal
• ⬜ Candle Breadth: shied away from the border of a bullish signal
• ⬜ Market Phase Shift Indicator: still not active, this is a longer-term indicator

Learn more about the Leading Indicators in the Learn Center!

Upcoming Earnings: Oracle releases tomorrow

Click here to test what to expect when ORCL releases earnings tomorrow.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Time for Value to shine?

TOGGLE analyzed 17 similar occasions in the past where entry point indicators for Dollar Tree dropped and historically this led to a median increase in the stock price over the following 3M. Check it out!

General Interest: Black holes are watching us

Yesterday we were posting Musk memes so bear with us if today we go a bit sciencey. Trust us, this is really cool.

In short, it appears black holes are observing the universe.

As a refresher, in quantum theory you need to observe a particle to make it “real”.

An undisturbed particle is here but it’s also there, it exists as a superposition of probabilities. Then you observe it and - bang! - the wave function collapses and the particle is in a specific spot.

Guess what, the event horizon of black holes seems able to do what we as observers do: it can collapse the wave function. Space-time itself plays the role of the observer. The Universe is watching itself!

Read more about it here on Quanta.