VIX at Lows: The Current State of Stock Markets and Recession Predictions

VIX at lows suggesting with blissful hindsight why there has been a rally so far in stock markets. Then what happens tomorrow we don’t know…

Our view is still the same: the recession will be tougher in the coming months than anticipated and central banks will calm down. I’m not saying this but the markets think it and from here, in fact, we have the rise in share prices and the downsizing of bonds.

After all, even the stupid rules of the Stock Exchange such as the one that if the indexes exceed 20% from the maximum then we are in a bull market have been respected (for what they are worth):

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FED week with the meetings of the 2 US central banks and the ECB this Tuesday and this Wednesday. And then also those of China and Japan.

Inflation data this Tuesday.

No one can say a word about how much the recession will be: on Saturday at a conference in Bologna some entrepreneurs (mechanics, textiles and ceramics) confirmed to me that the situation is starting to get serious, with suppliers calling because they have no orders or other suppliers coming absorbed by foreign companies and lose focus. A textile entrepreneur told me that the large clothing chains are starting to see sales drop and limiting orders and this is a very serious symptom of a deteriorating situation. Below is the Italian industrial production which weakened further in April 2023:

But the real thermometer that central banks look at are jobs: in the following graph, employment opportunities as measured by the various LinkedIn sites Indeed and company sing: the job market is cooling down.

In the US, an increasing number of jobless claims are being reported (gold yellow line) as this eventually coincides with a recession (grey area):

There is not much to do the little technical analyst: the pattern is always the same or accumulation after a reversal. Sometimes it looks like a 1-2-3 ross hook, sometimes it looks like a congestion, sometimes it looks like a trendline break, sometimes it looks like a double bottom. You choose what you like, but this is the mood. I understand that a precise technical analyst would like to have his say but as far as I think of technical analysis I find that being small geometers always brings bad luck, at least to me. It is evident that taking a De’Longhi with respect to any stock is buying a share with excellent fundamentals, on which you can always lose, of course, and the stop loss we have taken proves it, but if you are good in the end before or then you go back to where you were before.

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Let’s see what the kitchen offers:

BREMBO: sly lies below the highs of 14.50 euros, if it breaks we buy because it flies, expect a bayonet buy DE’ LONGHI: spectacular reduction, 40% discount compared to the fair price, EPS growing with the 3-year average compound rate positive, we are waiting for some technical signal. It’s the one we like best together with Reply below. All the more so as it has achieved downwards the horizontal congestion target that had cheated us…