Panic Button should not be far from the office
As you see, on both graphs, we have an S&P 500 that is in trouble and also that is conditioned by the U.S. bond market Barometer, the U.S. bond yield rate 10 years. These two graphs are the symbols of a global finance, in loss of compass; That hold each other by one the end of the wire. The bond mass or the amount of bonds (T-Note 10 years) issued by the U.S. government is positively correlated with U.S. indices since the U.S. economic model is based on consumption and spending (debt).
On the other hand, the rates of bond yields are inversely correlated with the indexes because of the more expensive the money, the more we do not seek to get into debt, and the more the investments reduce, and the more the access to the credit shrinks. So right now, in the US, we all know that the ingredients of another financial upheaval are brought together. This is why I present this graph which you must follow as the sound of the financial debacle will sound from these two big bells that are the S&P 500 and the US10YT. The mid-term election of the US president will be capital; He pledged tax cuts at the middle - class level. In order to achieve such an expansionary fiscal policy, the cost of the currency would have to be accessible, thus reducing the value of the currency and thus exploding in terms of budget the monetary quantity through the issuance of bonds.
Now the state of US finances is overdue. The debt-to-GDP ratio (100:1) has reached an incredible level. Then two hypotheses open up so that the American President, on the other hand, his probable re-election, revives US finance; Either it puts pressure on the Powell FED to lower the dollar, in order to sustain has a reasonable threshold the level of the debt; Either he will go to the clash with the federal government, at the level of the financing of their debt (by the issue costing bonds and money quantity) to possibly have a shutdown bis! There are also other possibilities but I will limit myself only to these two at the moment!
[b]Technical: Carefully monitor the 2600 points (S&P 500) and range 3.40 - 3.15% (Bond return rate 10 us). If the level of 2600 points is broken, could very easily fetch 2320 points (which would confirm the Bear Market). It will be related to the fact that the 3.40% will first exceed the US10YT.
On the other hand, the rates of bond yields are inversely correlated with the indexes because of the more expensive the money, the more we do not seek to get into debt, and the more the investments reduce, and the more the access to the credit shrinks. So right now, in the US, we all know that the ingredients of another financial upheaval are brought together. This is why I present this graph which you must follow as the sound of the financial debacle will sound from these two big bells that are the S&P 500 and the US10YT. The mid-term election of the US president will be capital; He pledged tax cuts at the middle - class level. In order to achieve such an expansionary fiscal policy, the cost of the currency would have to be accessible, thus reducing the value of the currency and thus exploding in terms of budget the monetary quantity through the issuance of bonds.
Now the state of US finances is overdue. The debt-to-GDP ratio (100:1) has reached an incredible level. Then two hypotheses open up so that the American President, on the other hand, his probable re-election, revives US finance; Either it puts pressure on the Powell FED to lower the dollar, in order to sustain has a reasonable threshold the level of the debt; Either he will go to the clash with the federal government, at the level of the financing of their debt (by the issue costing bonds and money quantity) to possibly have a shutdown bis! There are also other possibilities but I will limit myself only to these two at the moment!
[b]Technical: Carefully monitor the 2600 points (S&P 500) and range 3.40 - 3.15% (Bond return rate 10 us). If the level of 2600 points is broken, could very easily fetch 2320 points (which would confirm the Bear Market). It will be related to the fact that the 3.40% will first exceed the US10YT.
Francois Abley
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.