S&P 500 Gains Over $1 Trillion in a Day, Sparking Fears of a Dead Cat Bounce Before a Bigger Crash

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As a seasoned crypto investor with a few gray hairs to show for it, I can’t help but feel a mix of cautious optimism and skepticism when I see headlines about market recoveries. The S&P 500’s impressive rebound is certainly welcome news, but the economic data pointing towards a potential recession has me raising an eyebrow.

The S&P 500, a key indicator for the stock market, had its best day since November 2022. This was due to an increase of over 2.3% in its last trading session, as it bounces back from a substantial drop it experienced earlier this month.

As reported by Kobeissi Letter on social media platform X (previously known as Twitter), the S&P 500 index gained over a trillion dollars in market value in just one day, as equity markets continued to rebound following a recent slump.

BREAKING: The S&P 500 officially posts its best day since November 2022.

— The Kobeissi Letter (@KobeissiLetter) August 8, 2024

The stock market decline was due to a combination of several elements, such as investor anxiety about economic expansion and the possibility that artificial intelligence might be overpriced in the market.

The recent U.S. unemployment figures have surpassed expectations, causing a well-known economic indicator called the Sahm Rule to be activated. This rule compares the three-month moving average of the U.S. unemployment rate with its lowest point over the past 12 months. This comparison could signal an impending recession.

As tensions escalate in the Middle East, investors are growing increasingly uneasy, with speculation mounting that Iran may soon retaliate against Israel following the assassination of Hamas’s leader Ismail Haniyeh in Tehran.

The current rebound might be considered a temporary surge before another decline in a prolonged downward trend, often referred to as a “false recovery” or “dead cat bounce.”

In simple terms, an “alarming” economic signal in the U.S. seems to be indicating an approaching economic downturn or recession. This indicator has a track record of correctly predicting past recessions for the past 75 years.

For the past four months running, the U.S. unemployment rate has been on an upward trend, marking its longest stretch of increase since the 2008 Financial Crisis.

As someone who has closely followed economic trends throughout my career, I find it concerning to see the unemployment rate rise from 3.8% in March to 4.3% in July, marking its highest level since October 2021. Based on historical data, when the US unemployment rate rises for four consecutive months, as we have seen over the last few months, it often signals the onset of a recession. This trend is particularly alarming to me given my personal experience during the Great Recession in 2008, where I witnessed firsthand the devastating impact that a prolonged economic downturn can have on individuals and families. It’s essential for policymakers to take swift action to address this issue before the situation worsens further.

Currently, after dipping beneath $50,000, Bitcoin has rebounded and is trading over $60,000 again. However, it’s worth noting that its value remains lower compared to the record high of around $73,000 it reached earlier in 2021.

Significantly, Bitcoin is approaching a bearish chart pattern called the “death cross.” This pattern emerges when a short-term moving average falls beneath a longer-term moving average, which in this context means that Bitcoin’s 50 moving average could soon dip below its 200 moving average.

In October 2023, Bitcoin experienced what’s known as a ‘death cross,’ where its short-term moving average dropped beneath its long-term moving average. However, this trend was swiftly reversed as the value of Bitcoin began to soar.

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2024-08-09 22:55