The rebound in equities came to an end last week when the market hit a key resistance point at the 30-day moving average. The action confirms short-term traders are still bearish and in control of a market gearing up for bad news. The bad news could begin this week with the NFP report but the real risk is in the earnings outlook. The peak of the Q2 earnings reporting season begins next week and will likely result in a massive downgrade to the 2nd half outlook. In this scenario, we are expecting the S&P 500 to move down to 3,400 or lower.

What the market fears is a recession and the odds of a major recession shot to new highs last week. The Atlanta Fed's GDPNow tracking tool fell to -1.0% and predicts the US is already in a mild recession. Based on the fact the Q1 figures were also revised lower last week we think the 2nd quarter GDP could be below 2.0%.