The S&P500 bounced back of the the bear market territory with the total YTD drawdown now at -18%. Specifically, the market now expects a global economic slowdown, which significantly lowered the monetary policy tightening expectations, and eased the liquidity shock risk.

In support, commodities are selling-off, which signals a lower headline CPI number and possibly allows the Fed to pause in September or later in 2022, which translates in a lower recession probability. Thus, tactically, S&P500 in likely to continue to rise, as long as it stays above the 3840 level (or the 20% drawdown threshold). The second breach below the 3840 could intensify selling – that’s the stop-loss order level

Here is the full report.