Are the 2 and 10 year bond markets calling JPOW's bluff?In this video I cover the divergence between the 2 and 10 year treasuries and the recent FOMC press conference language. Jerome Powell is promising one thing (continued rate increases), while the bond market seems to be claiming otherwise (Fed pause incoming). Who's right? Let's take a closer look.
US10Y trade ideas
USA need to cover chart and US10Y told us why?As we can see on chart long term dynamic trend line broke and after a short correction on US10Y, we should be ready to bull run up to 5% and that is a top range of long time coverage for US10Y, Hope not to see more up and I think we will start another range time box as shown.
Boxes 1 and 2; some how have same time range but most of time the chart fluctuated in range boxes 3 ( range 3.1% to 5.6%) and I think it is time to start another range box 3 ?!
US10Y - US03MThis is another thing that is getting everyone EXCITED.
It is going to invert soon. Once that happen, as you can see in the past, the Fed will PIVOT.
Analysis also indicated that the MOVE Index shown previously will hit a new low the same time this 10y03m inverts.
THE FED TYPICALLY CUTS RATES ON AVERAGE TWO MONTHS AFTER THE MOVE REACHES BOTTOM.
So do you think the Fed will Pivot???
All I can say is expect more volatility this coming weeks.
P/S : As always, do not just believe what I say. Use your common sense.
Next Recession ProjectionDescription
The purpose of this idea is, based on past recessions, to try to predict when the next one could occur. Many factors could influence the future, but for now, we will focus on two of the most known indicators to predict a recession, the Yield Curve Inversion(ICV) and the Sahm Rule Recession Indicator. Usually, when the ICV stays below 0 for a period of time, it indicates that a recession will occur in the future. As can be seen, this indicator predicted the last three recessions: '90, '00, and '08. The ’20 recession is excluded. Moreover, the SPX chart is added to reference where the markets could go.
The projection is indicated with pink color.
Yield Curve Inversion Period
The ICV period ranges between the time when the ICV went below 0% and the time of the last touch to 0%. The average for the last three periods is 425D. We are in the current period for 183D. Usually, while the ICV is below 0%, there is a high chance that the FED will not increase the interest rate or even pivot, as seen in that #1 and #2 periods.
#1: 455D
#2: 304D
#3: 516D
Projected:
#4: 426D
SPX
While the ICV is below 0%, the SPX moved on sideways or even upwards.
US Interest Rate
The average for the last three periods is 253D.
#1: 120D
#2: 214D
#3: 426D
Projected:
#4: 243D
Sahm Rule Recession Indicator
According to this indicator, once the ICV touches the last time 0%, there is a delay until the effects of a recession are seen. The average for the last three periods is 244D.
#1: 214D
#2: 213D
#3: 307D
Projected:
#4: 244D
Conclusion
A recession could start at the beginning of 2024. This would also coincide with the Presidential Cycle theory, where the third year of the US presidential mandate is more bullish than bearish, and the fourth year is more bearish than bullish.
Please keep in mind that this is purely speculation based on previous data, and there are many other factors that can change the outcome.
US10Y 🇺🇸 U.S. 10-Year Interest Rate History (1913 - 2022) One of the biggest "shocks" in the 22' financial markets is the breaking of the long-term (weekly) trend in Interest Rates — specifically the U.S. 10-Year Treasury (US10Y), which has gone through now two long-term trend cycles since it’s history dating back to 1913.
Given the inflation fight that the Federal Reserve is currently waging, while at the same time keeping in mind the structural debt-load that the U.S. 🇺🇸 is current burdened with, this begs the question can rates actually go higher from here?
While we do not know the answer as to the actual trajectory of interest rates into 23’ and beyond — what we do know is that given the structural debt load, we can speculate that at some point rates will likely be forced lower as a proxy of stabilizing inflation and also total debt servicing obligations of the U.S. Government.
Also keep in mind comments by J. Powell and the Federal Reserve as they have been preparing investors for a new macro regime of “higher for longer” .
Should this actually play out and not just be the "hawkish tone" of the Federal Reserve that is helping to push interest rates higher, investors must consider the ramifications that could come IF we have truly entered a new (rising) interest rate regime that includes structurally higher rates as part of the next 40+ year historical cycles.
Here is the same chart of the (US10Y) paired against the backdrop of other macro indicators including Federal Reserve Balance Sheet, as they give us insight as to both the bull and bear thesis for yields moving forward:
U.S. 10-Year (US10Y) vs. Fed Funds Rate (FEDFUNDS) 📊
U.S. 10-Year (US10Y) vs. U.S. Inflation Rate YoY (USIRYY) 📊
U.S. 10-Year (US10Y) vs. U.S. Federal Debt Total Public (GFDEBTN) 📊
U.S. 10-Year (US10Y) vs. U.S. Federal Reserve Central Bank Balance Sheet (USCBBS) 📊
U.S. 10-Year (US10Y) vs. U.S. Liabilities & Capital (WRESBAL) 📊
U.S. 10-Year (US10Y) vs. S&P 500 (SPX, SPY) 📊
U.S. 10-Year (US10Y) vs. Dow Jones Industrial Average (DJIA, DIA) 📊
What is your take on the forward trajectory of interest rates?
Have we officially broken the 40+ year downtrend on structurally low interest rates, given the potential for entrenched inflationary pressures within the U.S. economy?
Or, will rates be forced lower as structural debt obligations of the U.S. are far too great to support the notion of "higher yields for longer"?
Let us know your thoughts in the comments below! 👇🏼
Are U.S. Yield Curve Inversions Signaling 2023 Recession? Looking at the Inverted Yield Curve Chart s of the U.S. 10yr Treasury vs. U.S. 3mo Treasury (US10Y - US03M), along with the U.S. 10yr Treasury vs. U.S. 2yr Treasury (US10Y - US02Y) — are yields signaling a topping process? Or, should we even higher yields into 23'?
4-Hour Inverted Yield Curve Chart 📊
Top Chart: US10Y - US03M
Bottom Chart: US10Y - US02Y
Daily Inverted Yield Curve Chart 📊
Top Chart: US10Y - US03M
Bottom Chart: US10Y - US02Y
Weekly Inverted Yield Curve Chart 📊
Top Chart: US10Y - US03M
Bottom Chart: US10Y - US02Y
Monthly Inverted Yield Curve Chart 📊
Top Chart: US10Y - US03M
Bottom Chart: US10Y - US02Y
Monthly Inverted Yield Curve Chart 📊
Bottom Chart: US10Y - US02Y
U.S. 2yr Treasury (Inverted) vs. SPY (SPX ES1!) 📊
Black Line: SPY
Blue Line: US02Y Inverted
U.S. 2yr Treasury (Inverted) vs. QQQ (NQ Nasdaq) 📊
Black Line: QQQ
Blue Line: US02Y Inverted
U.S. 2yr Treasury (Inverted) vs. DIA (Dow Jones Dow Jones Industrial Average DJIA) 📊
Black Line: DIA
Blue Line: US02Y Inverted
U.S. 2yr Treasury (Inverted) vs. IWM (Russell 2000 Russell Small Caps RUT) 📊
Black Line: IWM
Blue Line: US02Y Inverted
Do you think that yields have reached their peak for this Federal Reserve tightening cycle here in late 22'? Or, will we see further rises in yields, putting more pressure on risk assets in the new year (23')? 👇🏼
Yield Curve Inversion Chart Template 📊👇🏼
www.tradingview.com
Inverted U.S. 2yr Treasury Curve vs. Asset (SPY QQQ DIA IWM) Chart Template 📊👇🏼
www.tradingview.com
US10Y The 1D MA50 is the key. So far rejected.The U.S. Government Bonds 10YR Yield (US10Y) has gone a long way since our top prediction two months ago and the update 5 days ago (4H time-frame):
Now back to the 1D time-frame, the price has started rising since the December 07 Low, exactly at the bottom (Higher Lows trend-line) of the long-term Channel Up, around the 1D MA100 (green trend-line). So far this is quite similar to the early August rise. The 1D RSI has hit the 1 year Support Zone twice, again as in the last (August 02) Higher Low.
In order to extend selling the US10Y, we ideally need to see the 1D MA200 (orange trend-line) break, which is holding as Support since December 29 2021, and in that case we will target initially the 2.510% (August 02 Low) Support and then the 1W MA100 (red trend-line).
A closing above the 1D MA50 (blue trend-line) though, should restore the long-term bullish trend and will be our buy break-out signal to enter and target the 4.340% (October 21 High) Resistance. So far the 1D MA50 seems to get rejected.
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dollar and yields more upthe bullish momentum in dxy/ bearish momentum in eur slowed down significantly most recently, this probably correlates with "an end in sight" of the FEDs interest rate hikes.
nevertheless there are more hikes to come and we havent seen US10y yield ranging around common interest rate targets around 5%.
the countermovement in dxy, the bullish break of eu's downtrend have endured for quite some time now and its probable we see the former momentum take over again for quite some time.
prepare for a bullish dollar and a bearish eur again.
targets for this something around early FEB next year, till then most rate hikes should be completed or announced.
OECD Leading Indicator vs. Market Cycles - Updated 122022 Today's post is inspired by the work of @CMT_Association here on @TradingView, and is designed to give some insight into financial market vs. business cycle timing:
We will be comparing various assets to the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (USALOLITONOSTSAM) for the 🇺🇸.
Keep in mind that readings above 100 (green dotted line) suggest economic expansion to come while readings below 100 suggests broader economic weakness, and likely economic recession based on history.
Given the the index is currently trading below 100 , and possibly continuing to fall — what does this mean for the economic outlook going forward, specifically as it compares to S&P 500 (SPY ES1! SPX), DXY (U.S. Dollar), Federal Reserve Fed Funds Rate (FEDFUNDS), 2/10 Yield Curve Inversion (US02Y US10Y), U.S. Inflation Rate YoY (USIRYY), U.S. Unemployment Rate (UNRATE), Crude Oil (CL1! USOIL), Lumber Futures (LBS1!), Gold (GOLD), Silver (SILVER), U.S. Mortgage Rates (USALOLITONOSTSAM), and possible timing of the financial market(s) recovery?
Let's have a look at some of the charts as they highlight that real economic weakness is likely into H1/23', paired with the potential beginning of a financial asset recovery as the business cycle works through its bottoming process.
Chart Key for Composite Leading Indicator (USALOLITONOSTSAM): 📊🗝
Green Dotted Line (Horizontal): >100 = Economic Expansion
Orange Dotted Line (Horizontal): Current Reading
Red Dotted Line (Horizontal): Historic Danger Zone
Black Dashed Lines (Vertical): Pre-Recession OECD Leading Indicator Peak
If you want a copy of this chart, here is the link to make a copy: 📊👇🏼
www.tradingview.com
S&P 500 SPX 1991-Present (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
S&P 500 SPX 2006-2017 (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
S&P 500 SPX 2016-Present (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Dollar DXY (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
US02Y Treasury (Black Link) vs. Federal Reserve Fed Funds Rate FEDFUNDS (Blue Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
US02Y/US10Y Yield Curve Inversion (Baseline >0%, <0% Curve Inverted = Trouble in Markets) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Inflation Rate YoY (USIRYY) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Unemployment Rate (UNRATE) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Crude Oil USOIL CL1! (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Lumber LBS1! (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
GOLD (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
SILVER (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Mortgage Rates (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Here is the updated release schedule for the OECD Composite Leading Indicator (USALOLITONOSTSAM) for 2023: 🗓
data.oecd.org
Learn more about the OECD Composite Leading Indicator (USALOLITONOSTSAM) using the link below: 💡
data.oecd.org
What is your takeaway(s) from these charts? 👇🏼
US10Y : What the Market is saying.Next week will be important. FOMC will decide on rates. Powell had said that they will slow down the rate hike. It should be less than the previous 75bps. It can be 50 or 25bps. Whatever it is, do you think it matters?
Well, a week before the FOMC decision, the MARKET had made a decision as well. Participants from around the world decided to drive yields lower. Last night was PANIC all around when yield went down BELOW 3.50%. This is foreseeable. In other words, the market is telling the Fed to go FLY KITE. Yield is already BELOW the EFFR. It is now more than 25bps below and once it goes 50bps below, then it brings a new meaning to what the market think/wants. Should the Fed insist on raising rates next week, this will only INCREASE the difference between the EFFR and actual yield. I am quite sure when the Fed raise rates next week, the market will double down and drive yields LOWER!!!
In the past, I learned/believe the idiom "don't fight the Fed". I begin to doubt that now.
Between now and FOMC next week, we would be hearing a lot of people giving their opinion and expertise about rate hike and how FX would react. Perhaps we should just ignore it. TALK IS CHEAP. Instead, I think it is best to follow the MONEY. The BOND market is BIG. Moving it requires a LOT OF EFFORT. I would listen to these EXPERTs running the bonds. If US10Y goes lower between now and FOMC, then we get the message from the MARKET, loud and clear.
As I said before, The MARKET decides - The Fed Implements - We just follow.
Lets get ready for PIVOT.
Good luck.
P/S : Do not just believe what I say. Use your common sense.
US10Y Critical point, break or hold on the Channel bottom!The U.S. Government Bonds 10YR Yield ( US10Y ) has gone a long way since our top prediction two months ago and the update 20 days ago (4H time-frame):
Now back to the 1D time-frame, the price is exactly at the bottom (Higher Lows trend-line) of the long-term Channel Up, below the 1D MA100 (green trend-line), which is where the last bottom was priced. The 1D RSI has hit the 1 year Support Zone twice, again as in the last (August 02) Higher Low and it remains to be seen if the price reacts with a bounce. So far the move is much weaker than in August.
In order to extend our selling we ideally need to see the 1D MA200 (orange trend-line) break, which is holding as Support since December 29 2021, and in that case we will target initially the 2.510% (August 02 Low) Support and then the 1W MA100 (red trend-line).
A closing above the 1D MA50 (blue trend-line) though, should restore the long-term bullish trend and will be our buy break-out signal to enter and target the 4.340% (OCtober 21 High) Resistance.
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** Please LIKE 👍, SUBSCRIBE ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support me, keep the content here free and allow the idea to reach as many people as possible. **
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You may also TELL ME 🙋♀️🙋♂️ in the comments section which symbol you want me to analyze next and on which time-frame. The one with the most posts will be published tomorrow! 👏🎁
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Using the MMRI to assess risk in this marketWatching the MMRI and assessing market risk as Powell speaks today.
If this indicator falls, the stock market will likely climb higher, and if the MMRI climbs higher, the stock market will likely fall.
Will the Santa Claus rally begin soon?
As speculators in this crazy market, we can only hope so.
Yield curve inversion, CPI, GDP and DOWHistorically, an inverted yield curve has been viewed as an indicator of a pending economic recession; hence the inversion of the yield curve might be perceived as a leading indicator.
Once the yield curve is inverted, it may be several months before we see GPD contracting; and it is not guaranteed that we will see a sharp drop in GDP.
First pane: You can see the development of GDP and the associated development of the Dow Jones Index (log-scale). The area below you shows the US 10-year/2-year yield (bubbles indicate a yield curve inversion). As you can see, it might be some time before we see a GDP contraction after the yield curve inverts.
The last area shows the core CPI that drove the Fed and expected higher dot plot medians in December. Nonetheless, recent data suggests that the core CPI may have peaked (to be confirmed).
10 year yield is still bullishThis week is one with a lot of economic events; and a lot of volatility is expected in the market place. US yield has been creating a higher high and is currently sitting on top of a resistance-turned-support level. I expect it to dip through the trendline support and reject swiftly from the horizontal support in order to create a strong bullish signal.
2 Year-10 Year Yield curve deeply invertedIf there is any tell-tale sign that a massive recession is coming, it is this: 2-Year - 10-Year yield curve inversion. If you look back in history you would see that every time this yield spread has inverted, the economy and the stock market has gone into a recession. The problem is that this is the deepest inversion from an historical perspective - deeper than 2008 inversion. This can play out very badly for the S&P500, and the stock markets in general.
Will S&P500 be in big trouble because of this?
Does the yield curve inversion signal recession?The famous negative curve.
This market concept is used when the US02Y or US03Y operate at higher levels than the US10Y, this behavior usually anticipates recessions, but why does this happen?
The inversion of the yield curve distorts the expected functionality of the financial system.
Under "normal" conditions, raising funds in the short term for investment in longer terms is used to provide positive arbitrage between interest rates on liabilities (paid) and assets (received), a strategy subject to the limits of the rollover capacity of the liabilities and raising new funds.
The availability of assets with higher premiums and liquidity, US02Y and US03Y, makes it less attractive to offer funds for longer terms < US10Y, and more expensive to raise funds for those who demand funds for shorter terms.
So the interest curve is considered a kind of thermometer of what lies ahead in an economy, and it is the graphic representation of how much investors are charging to lend money in different maturities, and once it is inverted, it means that it is more expensive to borrow in the short term than in the long term – an unusual thing, because more distant payment dates mean greater risks for the borrower.
In the US economy, a widely documented fact is that yield curve inversion (i.e., when there is a negative differential between long-term versus short-term bond yields) is a good leading indicator of periods of economic contraction. four to six quarters ahead.
According to data available on the Federal Reserve website, yield curve inversion has preceded every US recession since 1950, with the exception of a false signal in 1967.
There is also evidence that indicators of this nature are important predictors of periods of economic contraction in other countries.
But are there any silver linings to this unusual reversal scenario? Yes, in these moments of greater uncertainty we have an interesting opportunity to buy good companies at low prices.
This is because after the monetary tightening cycle, the economy usually weakens, during this period risk assets suffer, considering that their future projections will suffer due to the scenario, so many of the market participants seek security in bonds, others seek to anticipate the recovery considering that as soon as this CORRECTIVE cycle ends, a new UPWARD CYCLE tends to maintain perennial companies and give birth to many new companies that arise in the face of challenging scenarios.