Big resistance ahead of 10 Year T-notes future After hitting a major weekly suport level, the market starts to break the downtrend structure on H4, making a new higher low, that can show a possible reversal of prices since stocks are going downtrend and investors are going for the treasury notes and bonds...
Interestrates
A Fork in the Road: How Will the Recession Affect Crypto?The more positive way of looking at LUNA, and other crypto disasters in general, is that these sorts of systemic problems eventually all get caught as the foundation falls underneath.
In fiat, these sorts of issues get covered up, bailed-out, and hidden behind tools like quantitative easing as people get pushed out into the streets through inflation and housing scarcity and such. It's a more socially acceptable form of exploitation in a way - with the worst of them actually dipping into taxpayer money and public funds. Just ask the exploited classes about this stuff - they know all about it.
Keep in mind that Bernie Madoff was able to get away with his racket for 17 years because the market generally always kept on going up. When the recession hits, we're going to start seeing the ugly undersides of what's been going on in fiat, too. Ponzi schemes are not exclusive to crypto, and there's a lot of pot calling the kettle black arguments floating around, especially in finance. The guilty conscience often attacks what they themselves are doing.
The big question for crypto holders is what happens when the recession hits - there's primarily two different types of outlooks in the space right now.
The pessimistic outlook is that when fiat goes down, so does crypto, as it has typically done for most of its runs.
The optimistic outlook is that Bitcoin itself was born out of the recession and controversy of 2008, where it has experienced the biggest of its returns.
Both are true, but how 2022 turns out will largely depend on how secure people are feeling about their money in general.
A couple of things that make the economy of the US today unprecedented, compared to recessions in the past:
- A historic 8%+ inflation rate which has not yet shown signs of slowing down.
- Interest rates will likely be raised to the highest it's been in recent history (possibly 3%, but likely higher).
- A massive 36% increase in money supply since 2020, mostly gone to government spending relating to COVID.
- High costs of living and new remote work options driving record amounts of people out of the cities (where the housing prices are the most inflated).
- The US government has been in massive debt for a while and have been using "fixes" like quantitative easing to kick the can down the road. It's been relying on money printing and taxing capital gains in order to pay off its bills but if the economy goes into a recession, that will no longer be an option.
Some people say that this is the "day of reckoning" for the US economy coming that has long been overdue. Which way will the tides swing for crypto and Web3? Time will tell.
Bond - Equity Correlation: The Most Important Question?TVC:US10Y TVC:NYA
A reminder that falling bond yields are synonymous with higher bond prices. In other words, a downtrend in yield equates to a bull market in bonds.
In January, bonds were still in a technical bull market as defined by the broad declining channel that had contained the 40 year bull market. In March the break of that downtrend turned the macro trend from bullish to neutral. Now, all that is left to define a bearish trend is a substantive violation of the 3.25% pivot zone. More recently, after testing the major macro pivot in the 3.25% zone, ten year Treasury yields have fallen sharply. The decline begs the question: Is the decline the result of the decades long negative correlation between equity and fixed income reasserting itself on the back of equity weakness or is it simply the beginning of a relief rally created by the combination of major support and a deeply oversold condition? While it is too soon to answer the question with any degree of certainty, it is clear that the outcome will have vitally important macro/portfolio implications. My guess is that if equities continue to weaken, that the bonds will continue to do better, but that without the bid provided by flight-to-quality that the outlook for bonds will quickly deteriorate as the oversold condition is alleviated. In future posts I will provide a deeper dive into the shorter term technical and fundamental outlook for bonds, but the posts from January 2, 11, and February 9 should provide adequate background for now.
Early in the year I published a five part market overview detailing my macro technical and fundamental views of the "Big 4" asset classes: Equities, Rates, Commodities and the Dollar. As part of that series I discussed the importance of the correlation between equities and bonds and the central role falling inflation played in creating the relationship.
This inverse correlation is a historical anomaly, yet it drives much modern portfolio construction. The idea is that when equities decline sharply, flight to quality in bonds pushes rates lower (bond prices higher). In other words, gains in the bond portion of the portfolio partially hedge losses in the equity portfolio. Variations of the 60/40 portfolio construction (60% equities and 40% bonds) and risk parity strategies are intended to shield investors from the worst of equity declines and indeed have had an admirable track record of reducing return volatility. After decades of success, the amount of assets devoted to this strategy, both overt and passive, is staggeringly huge. If the historic positive correlation is reasserting itself due to a change in the trend of inflation (stocks down and bonds down), the subsequent unwind has the potential to create massive dislocation.
In my view, the combination of extremely negative real rates (nominal rates less inflation), an inflation cycle that has turned from virtuous to vicious, and equity markets, that at least at the index level, are extremely overvalued, may be setting the stage for a polarity switch in which bond prices and equity prices fall and rise together. That has clearly been the case so far this year. Year-to-date (YTD) the bond composite has returned approximately -12% while the S&P has returned approximately -1%. In other words, both sides of 60/40 and risk parity portfolios have lost considerable value. If the year were to end now, it would be a historically bad year for the strategy. Is the switch in correlation a short term phenomenon or the start of something much larger? To my mind, this is the central question for the remainder of this year. I think the next few months will be telling.
There is also the tension between high inflation and the growing odds of a significant recession. Not only does high inflation serve as an inhibiter to real economic growth, but so will the Federal Reserves (Fed) effort to return inflation to its long term trend. Paul Volcker had to create twin recessions to beat the great inflation. I doubt very much that this Fed will escape without having to make a similar choice.
Notes:
It is worth remembering that in an economy that is overly financialized and debt burdened, rising rates often break the weakest link in the economic chain. Weak links can be systemically important institutions, sectors or simply a dramatic sell off in the equity markets. That markets are currently in distress is clear. What isn't clear is that the distress is enough to create a systemic risk event.
Bonds and equities frequently move into and out of positive and negative correlation in shorter time frames. When I talk about historical correlation I am referring to the very long term.
Good Trading:
Stewart Taylor, CMT
Chartered Market Technician
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Gold Returns to a Value AreaGold has rejected $1836, and has made its back down to the value area we identified earlier. Recall that $1795 to $1815 was a range held by gold in the past. We suggested that if it did not have the strength to break out into the upper $1800's or the $1900's, it was likely to return to this range. After rejecting $1836, we fell straight through $1826, and broke through $1815, currnetly finding support somewhere in the middle of our expected range. We should have further support from $1795, but if not, there will be further support in the $1780's. We anticipate $1851 to hold as a ceiling if we catch another burst of momentum.
Utility and Resilience: MANA Bounces BackBear markets are often when long-term traders make their big moves - assets that seem to stabilize or even do well (MANA, MKR in the last few days) often show that a project has dedicated supporters and some legs to stand on during the "tough times". It's easy to make money during bull runs, but it's the projects that survive during bear markets that often lead to long-term growth.
Interest Rates vs Everyone - How Crypto Can Bounce BackA pretty rough week for the markets - especially crypto. The recent dips are a result of mainstream money (crypto curious, but not necessarily dedicated) leaving the space as a response to inflation woes and the Federal Reserve planning to increase interest rates over 2022. The US housing markets are also set to slow down as well, possibly leading to a recession in the US markets and the global economy as a whole.
What's the silver lining? Well, the last time the housing market dipped was in 2008-2012, which coincides directly when Bitcoin itself was invented by Satoshi Nakamoto. Will the same sort of sentiment emerge as a result of fiat money crashing this time around? Time will tell.
Gold Breaks Through SupportAs predicted yesterday, gold fell to 1836. We predicted that 1851 would hold as a lower bound, but if broken, 1836 was the next target. Gold appeared to find support at 1851, but the selloff resumed. We do appear to be witnessing a pivot from 1836 with 1851 currently providing resistance. If we are able to break through, then we can reestablish the range between 1851 and 1905. If not, 1826 is the next target if 1836 does not hold.
DOLLAR UP // EURO ( CRASH )The strength of the dollar as a currency is increasingly present against other currencies, if the FED continues to raise interest rates in this way and the rest of the countries do nothing with their currencies, we would be talking about an increase in strength for the dollar currency (at least temporarily). An increase in the strength of the dollar, would make a large number of assets and currencies, such as the SP500, Bitcoin, Euro, etc... fall sharply.
We are at a critical point, as we have already observed in the previous Euro analysis. If the strength continues to increase, there is a high probability that it could reach the levels of 120. After that level. We would be faced with a new scenario. Where the dollar will ultimately decide the future strength or weakness of the rest of the assets. It would not be surprising that we are facing a final sprint for the dollar where before falling the dollar itself, it will take everything ahead. Good luck to all !
Bye Bye EURO !! ( CRASH )The levels on the euro's chart against the dollar are highly worrisome.
If the European Union does not quickly raise interest rates more aggressively, we could see the Euro fall to levels of €1=$1 or even lower at €0.8=$1.
We note that it has been in a bearish channel since about 2005, which it has been respecting in a demanding manner. At the same time we have no nearby supports that can hold the price, so the HIGHEST probability is to fall. The market structure predicts an abrupt and rapid fall towards these levels, probably without giving us any retracement, as happened in the past.
We have already broken the bullish guideline within the bearish channel and this is not good news, since there is no " REAL SUPPORT " by market structure ( I REPEAT ) The area where it is right now, is NOT a SUPPORT !!! .
Europeans can be affected by this, losing 20% of their wealth added to inflation added to the uncontrolled growth of taxes. :( . Best of luck to All, hope it helps to get a clean picture of the future of the EURO.
Bearish Reversal in play for the VIX! After reaching the resistance zone of the upward expanding megaphone pattern just as we forecasted back in April, the Volatility index (VIX) has formed a strong intra-day reversal head and shoulders pattern on the 1H chart. This coincides perfectly with the positive divergences we are seeing on some of the benchmark US indices like the SPY and QQQ, which we believe is signaling for investors that the worst in terms of market declines might be behind us.
The sentiment for risk assets in general has reached max levels of fear and negativity and usually this is a good moment to start adding back some risk exposure to your portfolio.
We will be releasing a more detailed report and analysis in the coming week on what we expect from the markets moving forward and how we are positioning our portfolio.
Good luck out there!
The Bond Selloff ResumesAs anticipated the bond rout continues. We saw a brief relief rally after the FOMC, as the hikes were largely priced in. However, 119'01 provided prohibitive resistance, and ZN immediately rejected it. We found brief support at 118'04, but have broken through this level, and are currently clinging onto 118'00 by a thread. The next target is the level below at 117'19. The Kovach OBV is extremely oversold, so watch for a relief rally, which could test 119'01 again.
This is A Bear Market Rally, Be CarefulWe saw a strong move to the upside after the Fed hiked interest rates by 50 basis points yesterday but does that mean that the trend has reversed? Most definitely not! Watch this video to see my forecast and what we need to see before we can assume a trend change.
Happy trading!
Linton
The sell zone on EURUSDWe saw an upside push yesterday during the FED Interest rate decision.
We consider this only a pullback that will give us a better entry level.
Today, we will follow price action and wait for lack of momentum to the upside.
Tomorrow we also have NFP during which is also possible to see reversals.
We don't recommend buying!
As soon as we have a good entry, we will look to sell and take part in this move.
AUD/USD TA Resuls : +150 Pips ✅Please close 50% of your position and put your SL on 0.7215 . (RISK FREE) Results so far is +150 Pips ✅
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⚠️ This Analysis will be updated ...
👤 Arman Shaban : @ArmanShabanTrading
📅 05.05.2022
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EURUSD before FED Today is FED's Interest Rate decision.
We're expecting to see a rise from 0.5% to 1%.
A rise will definitely happen but what's more important is by how much and when would be the next one as well.
Technically, we're in a strong downtrend which is more likely to continue therefore we should see lower values.
The Interest rate decisions normally cause big moves and rejection wicks in price.
A conservative approach would be to look for entries after the news or also tomorrow.
The aggressive way to trade it would be to look to sell around 1,0590 and make an entry right after the news if there's a nice long wick.
The target is 1,0400!
EURGBP Outlook May 2022 The Pound is in a precarious position whereas the Euro probably seems the safer bet of the two. I expect a gradual bull run to take place, patience is a must here because the time of the fundamentals unfolding will take time, so getting a solid entry and riding it out will be the way. Technicals will also be posted on my page for the timeframes below!
EURUSD Outlook for May 2022...My analysis for EURUSD on the monthly timeframe. Includes some simple fundamental perspective but if you want to discuss fundamentals in depth feel free to comment below. Aside from that, there's not much the dollar can do to beat anticipations unless liquidity of the dollar really tightens. In that scenario, the dollar will really strengthen and we could see parity, but I don't think the Fed will tolerate that or even risk the possibility. It's more of a possibility that something breaks in the U.S. economy, which is the case when every recession has happened in the U.S., so it would be sudden. Aside from that the Euro is moving well economically too, maybe a little less enthusiasm towards it than the dollar and more of a risk to it's bullish scenario comes from Russia, energy and slowdown in the EU as a result of sanctions and high prices.
Either way, technicals on the lower timeframes to follow...
Xau/Usd-Perfect Time for Hedge TradeOANDA:XAUUSD
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Technical
Currently, we are at the 1900$ level and if we start analyzing the chart technically from the Daily we can easily spot that this is a strong support level where the trend can find new buyers and make a new wave upwards. If we go down to the 4H TF we can spot that the 1900 level is a really obvious one, and at the same time, it is a round number which makes it an even stronger level, so we expect the bulls to win this small battle. The SL is as we can see on the chart pretty close being just 11dollars below, but still reasonable and giving the trade enough space to, breathe'' if the wick is coming because the ATR (average true range indicator ) for the past 14days is around 27$ on the Daily TF and when we are just at this area of value zone this level makes sense because if it breaks lower we can expect an even bigger decline and doesn't make sense to take unnecessary loses. The TP is at 1980 making it 1:6 RR
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Fundamental
As the S&P drops more than 8% in about a week and is currently at a key level which if it breaks we can expect an even lower low, at the same time with inflation and interest rates hiking this is the perfect trade to take and at the same time is a perfect hedge for our Stock Portfolio.