FOMO - only Greed is stronger than Fear
The extreme strength of this week’s rally triggered a sharp V-shaped recovery, completely erasing last Friday’s losses. The E-mini S&P 500 (ES) closed back above its daily 20-day moving average, and the S&P 500 Indicator simultaneously flashed two bullish signals: a Bullish Impulse and an Accumulation phase that began at 6250 during Monday’s overnight session and gained momentum during regular trading hours.
Yes—FOMO is back.
❓ But how does this short-term rally fit into the bigger picture—especially with a weekly Bearish Impulse still active? Despite strong Q2 earnings across key sectors, the U.S. economy is visibly weakening, a trend clearly reflected in leading indicators such as the U.S. Leading Economic Index (LEI). The weak July Nonfarm Payrolls (NFP) report, however, is a coincident indicator—capturing the current state rather than the direction of the economy. To look forward, let’s examine the broader signal landscape:
🧠 U.S. Leading Indicators Turn Cautionary Markets continue to price in a soft landing—but leading data points increasingly suggest otherwise.
📉 Nonfarm Payrolls (NFP): Weakness Beneath the Surface Only 73,000 jobs added in July vs. 110,000 expected • Revisions to May and June cut another 258,000 jobs • Unemployment rate rose to 4.2%; participation fell to 62.2% • Wage growth continues to decelerate • The labor market is cooling—and not just around the edges.
🚨 Jobless Claims: Leading, and Worsening • Initial jobless claims have trended higher for three straight months • The Conference Board now flags this as an early sign of labor market deterioration • Unlike NFP, jobless claims are leading—and clearly heading south.
🏭 ISM Manufacturing PMI: Still Contracting • July PMI: 48.0, another month below the 50 threshold • Declines in new orders and production reflect a slowing industrial base • The U.S. manufacturing engine is sputtering.
📉 Yield Curve: The Classic Recession Bell • The U.S. yield curve remains partly inverted (US02Y - US03M), with short-term rates above mid-term yields • Historically, this inversion has preceded every U.S. recession since the 1960s • Markets now price in rate cuts as early as September.
🏛️ Macro Regime Shifts: Politics, Protectionism, and Price Pressures We’re witnessing multiple regime changes, particularly in the U.S., where economic policy is pivoting 180° from past globalization strategies.
🔀 De-Globalization: Inflation’s Silent Engine Structural shifts toward reshoring, economic nationalism, and supply chain redundancy are driving long-term change:
🌍 Slower Growth: Reduced global efficiency weighs on GDP 💸 Persistent Inflation: Supply chain costs keep price levels elevated ⚙️ Lower Productivity: Less specialization means less innovation 📉 New Investment Trends: Capital flows into defense, energy, infrastructure 🧭 Geopolitical Fragmentation: Global trade is splitting into rival blocs
De-globalization marks the end of the deflationary era—forcing investors to rethink growth, pricing, and allocation assumptions.
🧠 Optics vs. Fundamentals It’s no coincidence that policymakers showcase rising equity markets to justify their economic strategies. In an environment of structural stress, price action becomes narrative ammunition.
📈 Market Outlook: Topping Formation Still Intact • The macro playbook remains valid. A sharp rally is common between the 3rd and 5th day of a sell-off. The current bounce fits that mold. • Now the key question: Will the rally fail—or morph into a new leg up? • Until confirmed otherwise, the weekly Bearish Impulse and deteriorating macro data argue for caution.