Rate Cut 1930 - Pattern Recognition: 30s vs Today In 1930, when the Fed cut interest rates, the market crashed further. In today's tutorial, we will be comparing the 30s and today’s market to identify some of their similarities.
Where exactly are interest rates’ direction pointing us?
As we may have read, many analysts are forecasting that there will be a few rate cuts in 2024. Is this the best option?
My work in this channel, as always, is to study behavioral science in finance, discover correlations between different markets, and uncover potential opportunities.
Micro Treasury Yields & Its Minimum Fluctuation
Micro 2-Year Yield Futures
Ticker: 2YY
0.001 Index points (1/10th basis point per annum) = $1.00
Micro 5-Year Yield Futures
Ticker: 5YY
0.001 Index points (1/10th basis point per annum) = $1.00
Micro 10-Year Yield Futures
Ticker: 10Y
0.001 Index points (1/10th basis point per annum) = $1.00
Micro 30-Year Yield Futures
Ticker: 30Y
0.01 Index points (1/10th basis point per annum) = $1.00
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
1930
Great Depression: A Timeline of History - 1930A timeline of the Great Depression for 1930 overlaid with the Dow Jones Industrial Average
A Different Look at the Market Crash (S&P 500 Priced in Gold)This chart is a weekly of the S&P 500 priced in ounces of gold. The light yellow line is an overlay of the gold price. This view on the market is interesting for a number of reasons:
1) This is the price pattern the S&P 500 would have if gold was still money like it was in the early 1930's.
2) Some people, including me, think the current market crash is most like the crash/bear of 1929-1932, and back then the dollar was gold-based. So charts of the 1930's crash are actually represented like this chart, with the market priced in gold. So perhaps this gold based view of the S&P 500 is relevant when comparing to the 30's crash.
3) Interestingly this chart of the S&P 500 priced in gold shows that the market topped out in Oct 2018, back when the market first had sudden large price drops that made many people (including me) think the bull market was over. As far as gold is concerned, the bull market in equities did end at the end of 2018 and the last year or so has been a few rallies up to lower highs. Based on this view of the market you would not have been fooled into thinking the bull had continued, giving more warning of what was coming.
4) From the chart you can see that back in October 2018 it would've taken 2.46 oz of gold to "buy" the S&P 500 index (if it were a stock). As of today's close it would take about 1.6 oz of gold --a 35% loss from the highs, even with the last few days bounce.
The crash and bear market of 1929-1932 took the DJIA down 87% by the bottom. But today's market is unlikely to fall that far because of all the trillions of dollars in bailouts and rescues the government and Fed are doing. All that money created and thrown into everything will certainly devalue the dollar and have many other effects that make it difficult to predict the market.
So today's market might not fall as far as the 30's market, but your money probably won't buy as much either by the time this is through. So how do you know what's really going on? I suspect that this gold view on the market will remain more coherent than the dollar view, will better show you how the market is actually doing, and is a more directly comparable to the early 1930's bear market charts. Perhaps this view of the market will fall 87% before it's over (or worse).
