How things got linked up with one chart(FED, Gold, US10Y,NQ)
I covered this part in my video. To be more specific, I made this chart to better understand how things linked up.
US 10Y yield is the anchor that rising rates may indicate two things: 1)strong economy, 2) inflation
Fed is only able to directly control the short-term rate, say federal funds rate, not the long-end rate. On March 15th of 2020, It reduced the target range for the federal funds rate to nearly zero. That triggered the quick rebound of everything, including gold and NQ. We can see the two assets moved in the same direction. I bet everything moved to the upside!
So when things started to change?
In early Aug. of 2020, US 10Y yield completed consolidation and started to go up in a moderate mode. Look at the slope! However, gold reacted to rising yield with a retreat from historic high of USD2075ish and it came all the way down. NQ shrugged off and kept moving higher. The two assets started to move in opposite direction.
On Jan. 6th of 2021, I published an idea titled 'US 10Y jumped by 5+% A dangerous sign for stocks'. Actually, I'm concerned then, because I observed the speed of going up is tooo fast!
So when was the pattern of moving opposite terminated?
On Feb.8th 2021, US 10Y yield stood at 1.17%. That day was a special day. It created a new high, indicating the readiness of going up. Two days later, the yield started with a series of big bullish candles! This time, stock market couldn't shrug off like it did 6 months ago. It tumbled with gold. The two assets moved in the same direction again until now!
So, when will this pattern be terminated? I don't know. But that day comes with a few signs as below:
1. inflation goes above 3% above. Funds will go back to gold again as it serves the function of hedging inflation. Stocks, especially, growth stocks will suffer a lot. Value stocks will outperform the growth.
2. Corporate earnings are way better than expected. Investors realize that stocks are under valued. The main driver of the market comes back to earnings, not the monetary easing policies. Dollars may get stronger with funds outflow from emerging markets.
That's the map in my head of what might happen in the future. Follow the path, I'm confident to dig some opportunities.
Give me a like if you love this idea!
US 10Y yield is the anchor that rising rates may indicate two things: 1)strong economy, 2) inflation
Fed is only able to directly control the short-term rate, say federal funds rate, not the long-end rate. On March 15th of 2020, It reduced the target range for the federal funds rate to nearly zero. That triggered the quick rebound of everything, including gold and NQ. We can see the two assets moved in the same direction. I bet everything moved to the upside!
So when things started to change?
In early Aug. of 2020, US 10Y yield completed consolidation and started to go up in a moderate mode. Look at the slope! However, gold reacted to rising yield with a retreat from historic high of USD2075ish and it came all the way down. NQ shrugged off and kept moving higher. The two assets started to move in opposite direction.
On Jan. 6th of 2021, I published an idea titled 'US 10Y jumped by 5+% A dangerous sign for stocks'. Actually, I'm concerned then, because I observed the speed of going up is tooo fast!
So when was the pattern of moving opposite terminated?
On Feb.8th 2021, US 10Y yield stood at 1.17%. That day was a special day. It created a new high, indicating the readiness of going up. Two days later, the yield started with a series of big bullish candles! This time, stock market couldn't shrug off like it did 6 months ago. It tumbled with gold. The two assets moved in the same direction again until now!
So, when will this pattern be terminated? I don't know. But that day comes with a few signs as below:
1. inflation goes above 3% above. Funds will go back to gold again as it serves the function of hedging inflation. Stocks, especially, growth stocks will suffer a lot. Value stocks will outperform the growth.
2. Corporate earnings are way better than expected. Investors realize that stocks are under valued. The main driver of the market comes back to earnings, not the monetary easing policies. Dollars may get stronger with funds outflow from emerging markets.
That's the map in my head of what might happen in the future. Follow the path, I'm confident to dig some opportunities.
Give me a like if you love this idea!
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