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The Recession Chart
Everyone has a take on whether we’re heading into a recession.
Instead of joining the macro shouting match, let’s just look at price.
This chart tracks $SPY ( ▲ 1.48% ) with a 40-month moving average, going back to the late '90s.
Why 40 months?
Because it’s slow enough to cut through noise, yet responsive enough to catch structural shifts.
Not flashy. Just functional.
It keeps you aligned with the primary trend.
Here’s what matters:
Every true recessionary bear market….2000, 2008, 2020 - broke this line and stayed below.
They didn’t just test it. They broke, lived under it, and confirmed regime change.
Now, look at what didn’t break it:
2011 U.S. Debt Downgrade
2015 Oil Bust
2018 Trade War
Even the 2022 bear held the line
Each one loud. Each one full of recession calls.
None confirmed by price.
So where are we now?
Another scary pullback.
Tariff Tantrum. Global unrest. Lots of conviction.
But $SPY ( ▲ 1.48% )? Still above the line.
Price hasn’t confirmed recession.
Could that change?
Absolutely.
But price will give us earlier indications than any macro news headline.
Until it does, we’re just in a correction inside a secular bull.
This tends to serve as a floor and be a time to hold your nose and buy.
The Morning Show
I popped on “The Morning Show” today with my good friends and mentors JC Parets and Steve Strazza.
I come in around the 45 minute mark. It’s worth the watch.
Put it on 1.5x speed and let it rip.
Thompson’s Two Cents
I try with these post to zoom out and show bigger picture thinking.
More tactical trades and setups are for my other research column.
Thompson’s Two Cents, hitting inboxes Tuesday and Thursday.
Those familiar with that research column are familiar with the chart below.
This SPY 65-minute chart tells the story.
From February through April, every bounce attempt was met with a counterpunch. Failed rallies, RSI stuck in a bearish regime, and a steady trend below the 30-period EMA. That’s not strategy, that’s survival mode.
But look closer now, something’s shifted.
The RSI has flipped regimes, now holding above 50.
Price is back above the moving average.
And more importantly, every dip is starting to look like a reload, not a retreat.
When you see price defend a level like $550 multiple times, you don’t just write that off.
You start respecting it.
This is the first time in a while bulls are showing tactical discipline.
Not just swinging wildly, but defending territory and pushing back with structure.
The line is drawn. $550 is the level. Risk is clear. Reward is open field.
The fight’s not over. But the corner has been turned.
Seeing A Tactical Shift
As I’ve mentioned, these oversold/capitulatory rallies are seductive.
Trades are resurfacing make sure you check that column out.
Great Short Term Improvement - Let’s See It Continue
Not getting it? Check your spam folder.
Cheers,
Larry Thompson, CMT CPA