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Somebody knows something? TLT high volume spike. TLT high volume spike, after short term bullish run. Declining rate on the us treasury bonds in the broader market have given the 20 year TLT bond fund a boost over the last week. As the rates have been declining on the anticipation of a fed funds pause, the value of long term bonds has been increasing, or moreover moving up for the unrealized loss positions which is what sent SVB to the grave. Meanwhile; Chairman Powell announced an increased fed fund rate of .25% higher, despite the anticipation of a pause from the general public. At the same time they have proposed a general backstop to the banking system, guaranteeing a full discount swap for these underwater bond assets held by the banks, and guaranteeing depositors their funds are safe to prevent further bank runs. These actions appear bearish in the general outlook, and in character regarding the necessity of raising rates yet again, as well as the necessity of proving a backstop for the banks so as not fail. Of course, many have taken these action as a sign of bullishness, as a sign that Jerome Powell and the Federal Reserve board will be pausing soon, as he mentioned this to be the case for the next meeting. The fed funds rate is now 4.83 %. The TLT high volme spike, on a short red candle is indicative of high interest to the short side at this price level, indicating that the potential future move for rates is even higher still; forecasting that long term bonds will remain underwater; and the banking crises with the potential to continue into the near and medium future. These are simply my opinions. I am curious to hear what you all think. i am open to dissent, corrections of my errors, and alternative opinions, as long as they are evidenced, logical, and factual. what do you think?
NASDAQ:TLTShort
by International_Leeroy
Inflation dominates financial stability risks for central banksDespite the banking industry turmoil, central banks continued to raise rates last week. This marked moves from the European Central Bank (ECB) by 50Bps, Federal Reserve (Fed) by 25Bps, Bank of England by 25Bps, Swiss National Bank by 50Bps, Norway by 25Bps, the Philippines by 25Bps, and Taiwan by 12.5Bps. Central banks appear determined to show they have the tools in place to nip financial stability issues in the bud and so monetary policy is free to deal with inflation. The Fed is likely nearly done The March Federal Open Market Committee (FOMC) turned out to be on the dovish side. This was evident in the written statement in which the FOMC anticipates – “some additional policy firming may be appropriate” from “ongoing increases in the target range will be appropriate”. There was a risk that if the Fed chose not to hike rates, it would raise concerns about further financial system weakness. The reason given was that financial instability was "likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation”. The Fed has clearly signalled to the markets that it can control financial contagion from spreading by providing large amounts of liquidity. Over the past weeks we have seen a combination of measures to stabilise the market turmoil, including 1) The Fed’s proposal to provide immediate deposit protection and emergency lending 2) the intervention by Swiss Authorities to merge Switzerland’s two biggest banks and 3) the resumption of a dollar swap facility among central banks. If the banking crisis calms down and the economic data looks anything similar to the January/February reports, another rate hike at the May FOMC meeting should not be ruled out. Conversely, ongoing market dislocations could outweigh the data and push the Fed into pause mode. Currently the implied probability for Fed Funds Futures looks for a rate cut during the summer. That scenario can only materialise if the risks emanating from the banking system continue to deteriorate from a market and/or economic perspective. Gold offers a potential investment solution There is no doubt that the investment landscape is fraught with elevated uncertainty and, of course, the volatility that comes with it. Gold is benefitting twofold from its safe haven status alongside the earlier than expected pivot in monetary policy by the Fed. While the Fed does not currently see rate cuts this year, in contrast to market expectations, its projections raise the prospect of rate cuts for 2024 which remains price supportive for gold. The Commodity Futures Trading Commission (CFTC) has now largely caught up with publishing futures positioning data for gold following the disruption in February due to a ransomware attack on ION Trading. We now know there was a slump in positioning during February, but net longs in gold futures rose back above 154k contracts on 14 March 2023 as the banking crisis was unfolding. Laying an emphasis on quality stocks Rising concerns about financial stability tends to cause negative feedback on the real economy. Quality has stood the test of time, displaying the steadiest outperformance over 10-year periods. Dating back to the 1970s, quality has displayed the highest percentage 89% of outperforming periods in comparison to other well-known factors. The WisdomTree Global Developed Quality Dividend Index (Ticker: WTDDGTR Index) offers investors an exposure to dividend paying stocks in developed markets with a quality tilt. The WisdomTree Global Developed Quality Dividend Index has outperformed the MSCI World Index (Ticker: MXWO Index) by 1.54% over the past five years. The emphasis on quality, by tilting the portfolio exposure to stocks with a high return on equity has played an important role in its outperformance versus the benchmark. Over the past five years, we also observed the allocation and selection of stocks within the information technology, financial and healthcare sectors contributed meaningfully to the 1.54% outperformance versus the MSCI World Index as highlighted below.
FRED:FEDFUNDS
by aneekaguptaWTE
XauUsd Fed's Rate Decision | Will it retest or drop below 1915Last week 1915 was a decisive resistance for price to reach 1990. Upcoming Fed Decision, Will it retest 1915 support or will it trade below 1915? Upcoming Fed Rate Decision, I am confident Fed will rise Interest rate despite having a dilemma like SVB. However, it pausible Fed will stop interest rate at 5% IF inflation rate in bearish This is based on my personal opinion. momentum. Recent date show Inflation rate is at 6.04%. It was peak at 9.06% in June 2022. Drop 3.02% in 8 month. We will expect another 8 months or less until inflation lowered to 2% or 3%.
TVC:GOLDShort
by Khairi_RL
2
XauUsd Fed's Rate Decision | Will it retest or drop below 1915Last week 1915 was a decisive resistance for price to reach 1990. Upcoming Fed Decision, Will it retest 1915 support or will it trade below 1915? Upcoming Fed Rate Decision, I am confident Fed will rise Interest rate despite having a dilemma like SVB. However, it pausible Fed will stop interest rate at 5% IF inflation rate in bearish momentum. This is based on my personal opinion. Recent date show Inflation rate is at 6.04%. It was peak at 9.06% in June 2022. Drop 3.02% in 8 month. We will expect another 8 months or less until inflation lowered to 2% or 3%.
TVC:GOLDLong
by Khairi_RL
Side-step a potential storm!Just when we thought the hawkish narrative was pretty much priced in, SVB’s fallout basically threw a spanner into the hiking cycle. You’ve probably read quite a lot about the whole SVB debacle since Thursday’s trading session so we won’t harp on that. We instead want to turn your attention to two other markets that moved significantly since the SVB episode. Interest Rates & Gold. A sharp repricing has occurred in the expected rate path as markets digest the onslaught of SVB-related events. As a result, we saw the probability of a 50bps point hike jump from 30% to 80% and then back down to 20% as of today. Additionally, further rate hikes have also been priced out indicating market’s expectations of a more cautious Fed. Most importantly, the implied aggressive rate cuts starting from the end of 2023 caught our eyes here. As a reminder, the last time the fed paused and then cut rates, Gold responded with a 60% rally. As the potentially lower terminal rate and faster pace of rate cuts narrative begin to pick up momentum, we think Gold deserves more attention now than ever. The next FOMC meeting is only 10 days away. From there, we will get a sense of what the Fed thinks of the current situation. If they start to show signs of retreat from their hawkish stance, we believe it will be a catalyst for this trade. Another point of worry is economic data still coming in hot, at least for now. For those not keeping count, Non-Farm Payrolls numbers have beaten estimates to the upside for the past 11 months as the economy remains unusually strong. With the next set of CPI numbers coming out this Tuesday, a hot print could drive inflation worries further. If the Fed shows signs of easing on the hawkish narrative while Inflation numbers continue to be hotter than expected, higher Inflation expectations could once again drive investors into inflation-protecting assets like Gold. Key volatility gauges have pointed higher over the past few days and major indexes have edged closer to key price and technical levels. Given these, volatility is likely to compound from here as Commodity Trading Advisors (CTAs) potentially flip sides and funds rotate out of the banking sector. In such uncertain times Gold’s status as a safe haven asset could attract flows as investors sidestep the market turbulence. Looking at the price action, Gold still trades well clear of the 500 Day EMA mark which has marked the support for the price action and well clear of the 1800 physiological level. RSI is still middle of the road indicating that there is still room for Gold to run higher. Gold’s relationship with interest rates and position as an inflation-hedge/safe haven asset could very well position it for further upside from here. For now, we think it provides enough upside to sidestep the potentially volatile times ahead. We set our stops near the previous level of support and the 0.618 Fib level, 1755, and our take profit levels at 2065. Each 0.1-point increment in COMEX Gold future is equal to 10 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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 Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com
COMEX:GC1!Long
by inspirante
1
However you slice it, real estate doesn’t look good.While it might not be the subprime/GFC “SELL” kind of situation, the real estate sector is undoubtedly facing headwinds. With the most recent Fed’s preferred inflation measure, the Personal Consumption Expenditure (PCE) printing higher than consensus, maybe it’s about time we take the Fed’s hawkish commentary more seriously. To review, let us look at interest rate expectations from a month ago vs today. Market expectations are now pricing in three 25bps hikes instead of one, and more importantly no more rate cuts in the second half of 2023. This rise in rates expectation has notably resulted in sideways action for equities, while the dollar strengthens. What a difference a month makes! Mostly importantly, it’s not hard to see how higher rates will translate into higher mortgage rates. This is bad news for home buyers as borrowing becomes more and more unaffordable. In fact, higher mortgage rates have continued to weigh on the minds of Fed officials as underscored by the following statements in the latest Fed minutes, including “Participants agreed that activity in the housing market had continued to weaken, largely reflecting the increase in mortgage rates over the past year.” and “Participants agreed that cumulative policy firming to date had reduced demand in the most interest-rate-sensitive sectors of the economy, particularly housing.” Existing home sales are now at a 12-year low, surpassing the 2020 lows. Only 2 other periods post-GFC, saw a lower print, and it’s worth noting that mortgage rates during those periods were at the same level or lower. Home prices have also started to turn over, ending a 12-year run higher. Lower prices could indicate tepid demand in the housing market, which we will watch closely over the next few prints. And forward-looking indicators all seem to point towards contraction. With US Building permits and NAHB Housing Market Index slightly off the covid low, while the MBA Purchase Index close to the 7-year low. It does seem like however, we slice it, real estate looks pretty ugly now. One way to express the bearish view on real estate could be to use the CME E-Mini Real Estate Select Sector Futures which tracks the S&P Real Estate Select Sector Index. Looking at the sector futures alongside the 30-year Mortgage rates shows us the effect of the rising rates on the real estate sector. On the technical front, we see the sector future breaking the short-term support established since October 2022, while the longer-term trend seems to point downwards. Given our view that rates have further to go, negative home prices and sentiment measures across the board, and a technical break lower, we see the potential for the sector future to trade lower. We set our stops at 196, a previous resistance level, and the take-profit level at 163, with each 0.05 increment in the index equal to 12.5 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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 Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.federalreserve.gov
CME_MINI:XAR1!Short
by inspirante
The Fed rate or Why everyone is watching the US economy?The Fed or the Federal Reserve System is a kind of analogue of the central bank in the United States. It is an independent body and receives powers from the US Congress. Its independence lies in the fact that all decisions on monetary policy do not have to be approved by the authorities and even the president. We can say that the Fed does not belong to anyone, because. after agreement with the Senate, the main positions are appointed by the President of the United States, but the owners are private individuals. The functions of the Fed are the same as those of the central bank: issuing money, controlling private banks, changing the key rate, and other important decisions for the US economy, which affects the economy of the whole world. Let's analyze them in more detail: maintaining a balance between the financial and social spheres; protecting the interests of participants in banking operations; dollar issue; control of the internal financial market; acting as a depository for large organizations; supporting the functioning of payments within the country and between countries; maintaining liquidity. And now let's take a look at the questions about the impact of the Fed's actions on the crypto economy in order, so that you have a general picture of what is happening. 1. Why do many investors and traders in stocks and cryptocurrencies constantly follow the news from the US, especially the speeches of the head of the Fed? One of the Fed's main tools, through which they influence the US economy, is to raise or lower the key rate. The Fed sets the percentage rate at which loans are issued to banks. This, in turn, affects other market segments, and the effect is different for each. This has a direct impact on the bond market: the higher the rate, the higher the yield. However, the effect on the stock market is completely opposite, because the reduction in the rate is followed by an adjustment in other lending rates. At a low rate, companies' businesses can grow faster. Due to this, stock quotes of many companies also increase due to the increase in their capitalization. Consumer and business confidence is on the rise, the real estate market is rebounding, and corporate earnings are rising, which in turn has a positive effect on share prices. As the interest on loans decreases, the interest on deposits also decreases. There is more money in the financial system, which encourages people to look for more profitable areas of investment. Yes, just a second. We feel that you may get confused or never understand what it is and why everything works the way it does. Let's explain with a very simple example. The Fed rate is the percentage at which the main bank lends to other banks. If it falls, then other banks can take out a loan at a low interest rate and also issue loans with a small interest rate for organizations and individuals, including mortgages and credit cards. The decline in market interest rates encourages people to take out loans and buy various goods, invest in real estate and invest. The interest on deposits is falling, it is becoming less profitable to keep money on deposits, and people are looking for more attractive ways to invest - these are, first of all, stocks. Due to increased demand, the price of stocks and indices rises. And if the main indices grow, such as the NASDAQ, S&P500 or the Dow Jones industrial index, then Bitcoin grows, and other cryptocurrencies follow it. At the same time, if the Fed rate rises, then people pull their savings out of riskier types of investment into more stable ones (deposits / deposits). Thus, the capitalization of the stock and cryptocurrency markets is falling, followed by a price drop. As you have noticed, everything in the world of economics is interconnected, and it is extremely difficult to explain all its principles in one article. We just want to bring you to the relationship between the Fed rate and the cryptocurrency market. And here comes the next question! 2. Why is Bitcoin most of the time correlated with major stock market indices? Everything is a little easier here. Previously, Bitcoin was something incomprehensible to most - an uninteresting technology and hype. But as blockchain technologies are introduced into everyday life (mass adoption), Bitcoin has turned into a risky, but quite common asset of the market. Because of this, relatively recently, “old” money has entered this market. People who used to earn only in the stock market and large companies entered the market. Large investors have developed strategies for trading and investing. Thus, for them, Bitcoin has become a financial instrument, just more risky. From that moment on, there was a high correlation with the stock market. In conclusion, one of the important questions. 3. How do the US and the US dollar affect the entire world economy? In the past, there was a situation when world trade and its institutions, as well as the world banking system, became pegged to the US dollar, central bank reserves began to accumulate mainly in dollars, and a financial market was formed with tools that allow you to effectively place these reserves in dollar form. Simply put, most of the world uses the dollar, which is why it is the main reserve currency of the world. US hegemony, which influences the whole world, has been developing since 1944. Let's summarize step by step to consolidate the information: The American dollar and the US economy affect the entire world market, the first - because it has historically happened, and the second - because it is the largest in the world. If the rate rises, then after it interest on loans and deposits rises. It becomes more profitable to invest in bonds and keep deposits in banks. Companies and people are shifting funds from risky stocks and cryptocurrencies to more stable types of investment: precious metals, government. bonds or simply withdraw to fiat. If the rate falls, then after it interest on loans and deposits goes down. Companies and people are becoming more willing to take out credit, thereby increasing the financial system. Companies are developing business and increasing capitalization, people are starting to invest in more profitable instruments such as stocks and cryptocurrencies.
BITSTAMP:BTCUSDEducation
by Crypto4light
2
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! 👇🏼
TVC:US10Y
by kylemusserco
2
BITCOIN price, CPI, FOMC-Fed Funds Rate Next week will be hot🔥Today, we will share with you our estimates on the possible movement of the BTCUSDT price over the next week. Let's start with the fact that last week's trade was justified, and it is still relevant. Buyers managed to keep the price above the liquidity zone of $16400-16600. Over the next few days, we expect that buyers will find the strength for another upward impulse. The main task of the upward momentum is to break the next portion of the shorts' stops, which are hiding above $18000. And then, ideally, the final retest of the strength of the liquidity zone $16800 - 17100 . If buyers do not allow the BTC price to consolidate below this zone, then it will be possible to speak with greater confidence at least about a local change in the trend. At the beginning of next week, increased volatility in the market is guaranteed. After all, on 13.12 the US Consumer Price Index (CPI) will be updated, and on 14.12 the Federal Reserve will announce a new US Fed funds rate (forecast +0.5%) So subscribe to us, put a like under the idea and write a comment. And we, in turn, will update this idea on Tuesday/Wednesday and comment on the market situation at the moment. _____________________ Did you like our analysis? Leave a comment, like, and follow to get more
Editors' picks
Long
by P_S_trade
86
The Inflation of the 1980s Tells the Same Story: Pivot=DeclineI have heard both sides: 1) Historically, the Fed pivot will result in a decline in equities because they are pivoting in response to negative economic data which drags on equities, and 2) this time is different, negative economic data is positive for equites because it means inflation is on its way down. When people reference the former, for whatever reason, they don't take a look at the effective Fed Funds Rate in the high inflationary period of the late 1970's and early 80's and compare the Fed's pivot to equities. In the chart shown, you can see that once Volcker, the Chairman of the Fed, finally took a steadfast position against inflation and rose rates violently, inflation began to cool. Both in part of this raise in rates and the public's belief that Volcker had no intention of letting up, ridding the public of inflationary expectations. If you look at the charts, you can see that as inflation rose so did the markets. But as Volcker stamped his foot and pushed rates up, inflation began to cool. USIRRY, the third chart down, shows this. Equities began to decline due to this restrictive economic environment and belief the Volcker would not let up. Notice that, as a result, unemployment (bottom chart) began to rise. This had no positive impact on equities, contrary to what some might think because it would indicate inflation was being taken care of. Instead, the U.S. entered a recession and equities continued to decline. It was only once the Fed stopped lowering rates, unemployment peaked, and inflation neared their target rate did equities bottom. It is not fair to compare equities and pivots to the Great Recession or the .com Bubble, yet even in historical inflationary periods the same story plays out: the markets bottom well after the Fed pivots However, this time could be different in that Powell showed no hesitation in attacking inflation and destroying inflationary expectations. He has taken a direct lesson from history. As a result, unemployment could potentially peak faster than expected, inflation could decrease faster than expected, and equities could bottom faster than expected. I believe today's outcome will be similar to that of the early 80's, but that outcome will happen much, much faster. The markets have not bottomed in my opinion, but I expect them to in mid-late 2023. It's always best to keep equity exposure to avoid missing the bottom. Because you never know . InTheMoney
SP:SPXShort
by InTheMoneyAdam
6
Ok, here comes the Fed Pivot, what's next?With all the chatter on the Fed Pivot, we think it’s worth exploring, what happens after a Fed Pivot or Fed Pause. Let’s break down the discussion into two camps, a Fed Pause, defined as a pause in policy rate hikes, and a Fed Pivot, loosely defined as reversal of policy rates aka rate cuts. To keep things in context, we will look at the effect of the Fed’s Pause/ Pivots on Major Indices, the Dollar and Inflation rates. First let’s review where we are at now. The recent release of the October CPI numbers has spurred 3 notable things: 1) It knocked the dollars off its unprecedented rally since the start of the year. 2) It has given a little more credibility to the slight downward shift in inflation, with 2 consecutive lower readings. 3) It marked a local low in major equities indices Naturally, the question is, have we bottomed? Or is this a slight breather on the elevator down… To answer this question, we look at 2 similar periods in the past, where the fed pauses, then cut rates after. These past examples could be useful in providing some clues as to where markets might be headed next. Dot Com Period in 2000 Between June 1999 and May 2000, rates were raised before taking a 7-month pause, following which rate cuts ensued in Jan 2001. During this period, equities turned lower, with the DJI falling another 30% while the S&P & Nasdaq another 40% before finding the bottom. The bottom was only in when the dollar clearly broke its uptrend, inflation peaked & turned lower and after rounds of rate cuts. In fact, and somewhat eerily, the dollar broke close to the 108 level, almost exactly where the dollar broke its current uptrend. The Great Inflation of the 1970s In the 1970s episode, rate hikes were paused from Aug 1973 to Feb 1974 before a cut in 1974. Untamed inflation forced the fed into another hiking cycle from March 1974 before the final onslaught of cuts from July 1974 onwards. This rate pause was then followed by another over 30% decline in equities. Again, we find that the bottom was only in after Inflation peaked and the Dollar clearly broke its uptrend, while the Fed cut rates. If this framework of using the Dollar, Peak Inflation & Rate levels holds, a keen observer might note the similarities with what we are looking at now. So, if the current dollar break holds and Inflation truly peaks, then the Fed Pivot will be the last piece of the puzzle to mark the bottom. So, when will the Fed Pivot you might ask? Using the CME FedWatch Tool, we see the market implied probability of a fed pause starting in May 2023, followed by a pivot in September 2023. In our view, this is still quite far away and if historical precedence holds, there are still ways to go before we are close to call the bottom. Additionally, market timing and expectation of a rate pause and cut have continually been re-priced higher and further over the past year. We will not be surprised if the timing and level of pause and cut get repriced unfavorably again after the FOMC minutes release this week. From a price action perspective, the S&P seems to be near the upper band of the channel in which it has been trading since the downtrend started. This could once again prove to be an area of resistance, which could present an attractive short compared with the other 2 indices. The average of the past 3 declines from the upper to lower band range, took roughly 54 days and 700 points. Taking that as a benchmark, we set our stops at 4150 index points, close to the previous levels of resistance, and a profit target at 3500 index points, close to the average of the past declines and lower band of the channel. Each Index point is 50$ on the CME E-Mini S&P500 Futures contract and $5 on the CME Micro E-Mini S&P500 Futures. We will watch with keen eyes if the Dollar breakdown holds and listen for any change in the Fed’s timeline. If history is any guide, we remain bearish on equities, given the uncanny level of dollar index, inflation peak and Fed's policy path as we see now. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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 Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.forbes.com www.thebalancemoney.com
Editors' picks
TVC:SPXShort
by inspirante
36
US Inflation Rate, YoY, Double Top? - Long-term ViewPresently, the inflation rate in the US has started falling, which increases expectations for a pivot - end of interest rate hikes. And factually, we can actually expect it. The supply of M2 Money Stock (M2SL) and its annual growth rate are decreasing. The global economy is shifting, as leading economic index (LEI) indicate. This will undoubtedly put pressure on the Federal Reserve to cut interest rates. However, after the current crisis, the economic recovery will cause a recurrence of inflation. So, if that is the case, the next decade will be marked by tight monetary policy and high inflation. This situation will let the central banks introduce a new monetary system based on CBDCs using incentives such as cheaper credit. Check also my related ideas. Enjoy
ECONOMICS:USIRYY
by MichaelFX_ICT
Fed pivot indicatorThis chart is essentially proxy for the acceleration rate of interest expense for the US government, and has been a reliable indicator of fed pivot for 30+ years as the fed has ensured the US doesn't enter a debt death spiral. To keep this line 'inbounds' they need the middle of the curve to fall ~75bp between now and the 24th Or maybe they'll allow a brief spike above, and given the length of that chart, maybe 'brief' can be a number of months But as far as what would be normal fed behavior, we're at the tightening limit for interest rates twitter.com
FRED:FEDFUNDS
by yalla-yalla-habibi
5
Interest Rate Jargons and Fed Funds TrajectoryCBOT:ZQ1! We are in a rising interest rate environment. But wait, which rate are you talking about? All eyes are on the Federal Reserve. But could you really borrow money at the Fed Funds rate? If not, why is it a big deal? Most of us deal with different types of interest rates, such as those for bank deposit, mortgage loan, home equity loan, auto loan, credit card debt, student loan and business loan. How are these rates determined? How are they related to the Fed Funds rate? Before you take out a loan or make an investment, it’s a good idea to gain some understanding of these questions. Our discussions mainly focus on US dollar interest rates. Breaking Down an Interest Rate According to Bankrate.com, the national average of 30-year fixed mortgage rate on October 8th is 6.89%. How is this rate calculated? While all lenders employ elaborate methods to price an interest rate, I would like to introduce a simple formular to break down the rate into different components. R(e) = R(rf) + D(p) + R(p) + L(p) , where: • R(e) is the effective interest rate • R(rf) is the risk-free interest rate • D(p) is a duration premium • R(p) is the risk premium • L(p) is the liquidity premium Risk-free Interest Rate Generally, we consider short-term U.S. government debts to carry zero default risk. Target Fed Funds rate is currently in the range of 3.00%-3.25%. Duration Premium US treasury debts have different durations, or the number of days till their maturity. * Treasury bills (T-bills) are discount instruments maturing in one year or less from their issue date. T-bills are issued for terms of 4, 8, 13, 26, and 52 weeks. * Treasury notes (T-notes) are interest-bearing securities that have a maturity between 1 and 10 years. T-notes are issued in 2, 3, 5, 7, and 10-year maturities. * Treasury bonds (T-bonds) are long-term treasury securities issued with a 30-year maturity. Outstanding T-bonds have terms from 10 to 30 years. While all Treasury instruments are free of default risk, longer-term notes and bonds carry a duration premium. The longer the term, the higher the rate. We are in an inverted yield curve environment. US Treasuries are quoted and priced in yields. On October 7th, 2-Year T-Note is quoted at 4.312% while 10-Year T-note at 3.888%. The easiest explanation is that investors expect a recession on the horizon and interest rates to fall in the future. Risk Premium When a lender evaluates the default risk of a loan, they examine the borrower’s Character, Capacity, Capital, Collateral, and Conditions . These are called the “5 Cs” of credit. In mortgage lending, 5Cs generally refer to the credit history, income, down payment, value of the house, and current housing market conditions, respectively. The bigger the risk premium, the higher the interest rate. A subprime borrower with a 600 FICO score would pay higher rate than one with an 800 FICO. Someone who could put up a 25% down payment would get a lower rate than those with 10% down only. In a booming housing market, a bank is willing to accept a lower risk premium. In the event of the borrower default, it could resell the house and likely get paid back in full. Liquidity Premium In the old days, when you got a 30-year mortgage from a savings-and-loans, it had to carry it on the book for the entire term. Since the loan was so illiquid, the lender had to charge a high premium to compensate for all the risks it took. With the invention of the mortgage-backed securities (MBS), lenders could package hundreds of loans into MBS. As they recoup most of the capital quickly, they could make more loans and generate more fees. Readers who are interested in the history of MBS may check out Michael Lewis’ classic, Liar’s Poker: Rising through the Wreckage on Wall Street. Mortgage loan applicants may find that Federal Housing Administration (FHA) loans carry a lower rate. If your loan meets FHA’s requirements, it would be guaranteed by the government agency. Therefore, it carries a lower risk for the lender. Additionally, FHA-conformed loans can be easily packaged into MBS, enhancing their liquidity. The Importance of Reference Rates When a lender prices an interest rate, it usually employs one or more reference rates. If you carry a credit card balance, you may notice that interest charges vary monthly. Look up the Customer Agreement with the credit card issuer, you would likely find them defining the Annual Percentage Rate (APR) as “prime rate + xx%”. Typically, the mark-up portion on the right is fixed for contract terms. However, prime rate is usually defined as “Fed Funds + x%” and may be updated monthly or weekly. If your credit card says APR = prime rate + 12% and Prime Rate = Fed Funds + 3%, you will be paying 18.25% (= 3.25+3.00+12.00) on outstanding balance, accrued daily. If the Fed raises rate by 75 bp next month, you will find the APR jumping to 19%. Most lenders use reference rates. With Fed Funds being the root of rate calculation, every Fed rate decision would cause a repricing of the entire credit market. Fed Funds rate is the most important interest rate benchmark in the world. This is why we call it the “Mother of All Reference Rates”. If you do not wish to iterate rate calculations step-by-step, other references may provide easy solutions. For example, a small-town savings-and-loans could set its deposit rate at the Secured Overnight Financing Rate (SOFR) CME:SR11! , and mortgage rates at 5 basis points over the national average rates published by Mortgage Bankers Association. Rate Trajectory Projected by Fed Funds Futures CME 30-day Fed Funds Futures ( CBOT:ZQ1! ) are directly linked to Fed Funds rates. Keeping up with T-bill market conventions, they are quoted like a discount instrument, 100 – R. Interest rate of 3.25% will be converted to a market quote of 96.75 (=100 – 3.25). If you ever wonder why, this is because short-term rate products do not make periodic coupon payments. Instead, you buy at a discount and get the par value back at maturity. ZQ has monthly contracts going out for five years, with good liquidity for the first 1-1/2 years. It is a reliable measure of what investors think the Fed Funds rates would be in the future. Based on ZQ settlement prices as of October 7th, we get forward Fed Funds Rates implied by the futures market as follows: • OCT 2022: 3.080% • NOV 2022: 3.755% (+67.5 bp) • DEC 2022: 4.110% (+35.5 bp) • MAR 2023: 4.610% (+55.0 bp) • JUN 2023: 4.635% (+2.5 bp) • SEP 2023: 4.580% (-5.5 bp) • DEC 2023: 4.435% (-14.5 bp) • FEB 2024: 4.365% (-7.0 bp) The above quotes show where futures market expects rate hikes to end in Mid-2023. They also expect Fed Fund rate to go down immediately afterwards. Last Wednesday, in an interview with Bloomberg TV, San Francisco Federal Reserve Bank President Mary Daly called out such projections as inaccurate. She said that the Fed would like the rate to be restrictive enough (4.5%?) and to stay there for a while until inflation is back to the 2% policy target. Mispricing in the outer months may be a good trading opportunity. Just remember, if you think the implied rate in December 2023 is too low, you would short ZQ futures. This is because of the 100 – R pricing convention. A bigger R would result in a smaller 100 – R. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. TradingView users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Editors' picks
CBOT:ZQ1!Short
by JimHuangChicago
15
HD: Double bottom?Home Depot Inc Intraday - We look to Buy at 285.03 (stop at 271.38) Buying pressure from 265.00 resulted in prices rejecting the dip. Posted a Double Bottom formation. The reaction higher is positive and highlights a clear reversal. A weaker opening is expected to challenge bullish resolve. Dip buying offers good risk/reward. Our profit targets will be 328.98 and 340.00 Resistance: 300.00 / 330.00 / 418.00 Support: 285.00 / 265.00 / 150. Please be advised that the information presented on TradingView is provided to Vantage (‘Vantage Global Limited’, ‘we’) by a third-party provider (‘Signal Centre’) . Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Signal Centre.
NYSE:HDLong
by VantageMarkets
DXY & FED FUNDS RATE2 day Time frame update of Quarterly DXY chart below.... DXY shown here with macro harmonics, contrasted with historic Fed Funds rate. Arrows indicate BTC cycle lows put in well below prior DXY peaks, and serves a small dose of balancing hopium in an otherwise bearish market. Fractal is taken loosely from the circled areas, with the suggested path involving consolidation in the 115/117- 105/8 range into next year. Hypothesis: as developed nations step in to intervene to prop up their currencies, by tightening ( central bank rate hikes like we are seeing from BOE and Swedish Central Bank in the last week) and potentially tapping into their long end US Treasury reserves to purchase dollars ad buy back their own currency, as late last week's BOJ intervention suggests, DXY will consolidate but ultimately break up into the 119-low 120's before some cooling off. Noteworthy technical macro ascending channel with 4-5 confirming touches which we are now closely approaching. With S&P P/E rations in the 18's we may start to see sidelined institutional investors start to enter the market at the 15-17 mark, as at this juncture with real negative rates dominating financial conditions, equities begin to service portfolios as a hedge against inflation. ***Harmonics are merely noteworthy phenomena, and not intended or regarded by myself as predictive of future price movements in any way.
TVC:DXY
by Linneaus
Quarterly DXY & Fed Fund RateChart Shows quarterly DXY and Fed Fund rate, with macro shark harmonic. Terminal PRZ of T1 at 117, t2 125 region with t3 at 136-38. Would be nice to see consolidation at 115-116 back to 106-8 area as other nations begin intervention. As of this hour, GBP halted trading trading as it collapsed 3.25% ***harmonics are not a predictive tool, they are a phenomenon of interest we see in the markets but I personally have no data suggesting they backtest in any consistent or reliable way across asset classes.
TVC:DXY
by Linneaus
DXY versus Fed Funds rate and PMIsDXY shown here with macro harmonics, contrasted with historic Fed Funds rate and US PMIs. Fractal is taken loosesly for the circled areas, with the suggested path involving consolidation in the 115- 105 range. Hypothesis: as developed nations step in to intervene to prop up their currencies, by tightening (central bank rate hikes like we are seeing from BOE and Swedish Central Bank in the last week) and potentially tapping into their long end US Treasury reserves to purchase dollars ad buy back their own currency, as late last week's BOJ intervention suggests, DXY will consolidate but ultimately break up into the 119-low 120's before some cooling off. Noteworthy technical macro ascending channel with 4-5 confirming touches. ***Harmonics are merely noteworthy phenomena, and not intended or regarded by myself as predictive of future price movements in any way.
TVC:DXY
by Linneaus