Midweek Macro Note: The Dead Cat Dragon...?, a JPY Puck Save, BoJ Decision

In this Midweek Macro Note - we discuss the probabilities of a 'dead cat bounce' versus a 'dead cat dragon', look at the JPY puck save, the BoJ decision, the latest on energy, and much more.

Don Johnson (@DonMiami3), Chief Economist

Good Thursday evening MacroEdge Readers & Community,

This evening we’ll take a look at the rally action underway in the US and Asia with the KOSPI and Nikkei up big off of key moving averages. From a technical standpoint, both were absolutely gutted and oversold, and the KOSPI bounced hard off of the 200 daily moving average, sitting below it for a day. The key driver was liquidations, a giant short squeeze, and the government of Korea announcing a nearly $14bn injection into the sovereign wealth fund to invest in AI, data center, and technology equities. While this hasn’t happened yet - it’s enough to quickly restore confidence in the short run - and as seen below in the technicals, it’s almost textbook where these bounces happened.

Overnight - the KOSPI sits up 12%, while the Nikkei is currently up 1%, and the Nasdaq is up about .4%. The Bank of Japan is making its rate decision this evening - but that won’t happen for nearly 3 hours from the time of this writing, so it will be something that gets covered in the Redeye Macro Note. These moves have the classic characteristics of a 2000/2022 style countertrend rally - so I wouldn’t get too excited about them yet, unless the Nasdaq decides to break the parabolic rounding top pattern it’s been in since the Iran-war melt-up began.

On the oil and gas front - the UKMTO appears to have stopped reporting tanker incidents/attacks - and oil futures are off about a percent, 3-2-1 spread narrowed slightly today off of all-time highs - but the technicals continue to look constructive, covered below briefly.

Today’s GDP real GDP number came in softer than expected, and we continue to print more and more - while not getting very much out of it (other than market meltups in nominal terms?):

The ‘comedy’ post of the day - the US State Department used AI for a presentation on Africa, and the results are, shall we say… to be expected?

Not yet a MacroEdge Ozone paid subscriber? Upgrade to paid and get all of our research, portfolio strategy, commentary, data, and more below:

This evening we’ll be covering the following, briefly, because tomorrow’s data center update is going to be much more lengthy:

• Next Reports

• Coming Soon to Our Macro Research Suite

• Non-Operated Oil and Gas Opportunities

• The Dead Cat… Dragon? JPY Puck Save and BoJ Decision

• Oil and Gas Update

Next Reports

• Friday: Data Center Construction Part 2

• Saturday: Brief Redeye Macro Note

• Sunday: Weekly Macro Note

Coming Soon to our Macro Research Suite

• Oil and Gas Research – Once a Week Report and Commentary, along with the MacroEdge Oil and Gas Portfolio Strategy

• Portfolio Strategy

• Solutions Sector Integrations: Oil and Gas - Economic Advisory, Aviation - Technology

An exciting metric for our Substack community as we hit a new all-time high for readership this month - with two reports to go:

Non-Operated Oil and Gas Opportunities

As we continue to expand our capacities as an organization, one of the most exciting opportunities to come out of the year has been a significant expansion into the oil and gas industry. Mid-August, our team will have an update on an opportunity in the space, and we will be sharing more about that then. Stay tuned.

The Dead Cat… Dragon? JPY Puck Save & BoJ Decision

The market is a weird spot post-FOMC. There’s a lot of retail exit liquidity that needs to be sold into come August (with the last two large AI IPOs) and with midterms top of mind for the Administration - I suspect that they are extremely cognizant of market performance now. August marks a turning point, and just 3 months remain until the midterms. Per prediction markets, races like the Texas Senate race are virtually 50/50, and with the Iran War continuing and fuel prices remaining elevated, the situation could continue to worsen for the GOP. I suspect it will be another cycle of populism over qualification - and will really only be paying attention to the key ‘swing’ states come election time.

The question on the equities side is shifting to whether or not this bounce is going to be once that takes most indices back or above previous all-time highs, which would really occur between now and midterms.

You’ll notice that the Nasdaq is fighting this parabolic trend off of the move today:

On moves like these (as we saw into April), what really matters or not is if the trend can recover all-time highs or not, to determine if this is a ‘dead cat bounce’ or a ‘dead cat dragon’ that turns into a more powerful pre-midterm rally.

The Nasdaq is probably good for a 1K+ point rally or so if it breaks this intermediate trendline:

(Continued below: The Dead Cat… Dragon? JPY Puck Save and BoJ Decision, Oil and Gas Update, and FOMC Statement from John Galt)…

Upgrade to Ozone to continue reading: