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Fed's Catch-22A Catch-22 is a problem for which the only solution is denied by a circumstance inherent in the problem or by a rule. This is exactly the problem the Federal Reserve faces. Historic inflation continues to accelerate, becoming embedded into the market's expectations and risking a spiral effect In order to stop rapid inflation, and achieve its mandate of price stability, the Fed must raise interest rates as rapidly as inflation is rising. The Fed cannot raise interest rates as rapidly as would be needed to slow rapid inflation because it would rapidly begin to freeze liquidity in the corporate bond market. Rapid tightening would spillover to corporate earnings, asset prices, consumer borrowing and spending, economic growth and ultimately employment, countering the Fed's mandate of maintaining stable employment. The last time that investment grade corporate bond prices fell below their monthly EMA ribbon support was in March 2020, when the Fed made emergency purchases of corporate bond ETFs to ensure liquidity. Now the bond prices are falling below their monthly EMA ribbon support and the Fed is taking the exact opposite measure by calling for accelerated rate hikes. Is it possible to avoid a recession at this point? Only time will tell but the charts seem to doubt it.
AMEX:LQD
by SpyMasterTrades
4
Every Day a New Low for Bonds!!Bonds keep falling as yields are rising globally. It seems that we have to redo our levels to predict yet another new low in ZN. The Kovach OBV is solidly bearish and we have fallen 7 handles, from the 129's to 122's in the month of March. We are currently testing support at 122'10, but the bear rout shows no sign of stopping. It would be unwise to try to catch a knife here, although the probability of a relief rally increases with each rung down. Our next taget is 121'28. A relief rally could test 123'01 or 123'15.
CBOT:ZN1!Short
by quantguy
NASDAQ 100: Read the descriptionNasdaq 100 bounced back from the lows of 12950 and had trouble with staying under the 13000 level. Put call ratio for the market (PCC) have been falling, which indicates more calls are bought than puts. Looking at the past levels of the ratio it seems likely that the ratio is ready for mean reverting at this point. However put/call for equities (PCPS) are high, and could also be ready for a move lower while the general market put/call moves higher. Notice that the last weeks increase have not caused the put/call for equities to rise as much as previous when prices of nasdaq increased. this could again indicate that investors are less desire loading calls. Inflation expectations are still high (RINF), and FED indicated 6 more rate hikes to an expected federal funds rate of 1.9% end of year. VXX have been falling as a result of the increased price in stocks. But we could still see higher levels of VXX on the basis of increasing interest rates, high inflation and lower P/E ratios. High inflation (USIRYY) results in lower levels of consumer and business spending which lead to declining sales higher costs and therefore lower earnings. And a combination of high interest rates and high inflation leads to lower P/E ratio US03MY is also on the rise, and beta values for the 10 largest components of Nasdaq is over 1, which means in bear market, those stocks tend to fall more than the market. High risk free rate (US03MY) and high beta values will increase the CAPM cost of equity which again supports a price reduction in equities. The strategy is the same as before. Short every move higher (when in bear markets, the sudden and unexplainable and dramatic increase in stocks are brutal -this will shake retail out of their positions shorts and longs before moving lower. I still anticipate a move lower for 12000 level as the first low level. (I could be wrong for the move lower, but managing the right leverage will keep one from blowing up account or generating too much drawdown.) Everyone have FOMO right now of missing the bottom. Which is what the big guys want retail to have. Again i dont say that there are no bottom, we could have bottomed out, but when looking at all the indications I am convinced that we still can see lower price levels this year.
CME_MINI:NQ1!Short
by Fx-AlphaStrats
3
Stocks Blast Off After FOMC!!Stocks have rallied after the first rate hike in three years by the Federal Reserve. Novice traders might surmise that stocks would collapse off this news, however dedicated readers here should have been prepared. We called this rally days ago. Why? The rate hikes have been priced in months ago and we are seeing a 'relief rally' which follows with more clarity on monetary policy.We pivoted from 4144 and shot up through multiple levels to break highs at 4327. When the decision came we saw a brief pullback then a subsequent rip to even higher leves (A friend bought at 4261 and crushed it, cheers MJ!!). From here we can expect either ranging or higher prices, but will likely see resistance at 4421. We must break this level to see anything higher. Currently, we are seeing a brief pullback to 4327, where we should find support. If we retrace further 4293 should provide further support.
FX:SPX500Long
by quantguy
Litecoin Rallies Ahead of the FOMCLitecoin has spiked up with the rest of the crypto market as investors anticipate the FOMC decision today. The Fed is expected to lift interest rates by 0.25% (25 basis points) to combat inflation. We blasted up through $105, and attempted to cross the vacuum zone to $114, but a sharp retracement took us back to $105. We appear to be getting a lot of support from this level which once provided significant resistance. Despite the volatility, the Kovach OBV has increased substantially, though has now leveled off as the volatility has subsided. If the fervor dies down, then the value area of $101-$105 will act as a magnet. If not, we must break $114 to see higher levels.
BITSTAMP:LTCUSDLong
by quantguy
Ethereum Lifts as Fed Decision LoomsEthereum got a lift with the rest of the crypto market as investors prepare for the FOMC decision today . Crypto's are behaving increasingly more like risk on assets, and this asset class (which also includes stocks) got a nice lift in what is known as a 'relief rally'. We blasted through $2651, and after some volatility, continued the uptrend into the vacuum zone between $2651 and $2762. The Kovach OBV has shot up notably, suggesting there may be some real legs to this rally. But we must break $2762, which has proven to be a prohibitive barrier in the past, before we can see higher levels. If we reject these higher levels then we are likely to seek support around $2500 (that previous range) once more.
BITSTAMP:ETHUSDLong
by quantguy
Relief Rally in Stocks ahead of FOMCStocks got a major lift ahead of the FOMC rate decision today. As we are all well aware, the Fed is expected to lift rates by 25 basis points (one quarter of a percent) to begin their 'firefight with inflation' . The rate hikes were heavily priced into the markets, and when the decision is made, we can expect a relief rally as the uncertainty is lifted. Inflation is weighing on global stocks, so the action could help ease investor fears. The Kovach OBV has picked up sharply with the buying, taking us all the way back up the entire range to 4327. If you recall this was our exact level from yesterday's report. It is likely that the majority of the rally has taken place, but we could test as high as 4421, a relative high. If we face resistance, however, we could retrace the entire rally back to support at 4144.
FX:SPX500
by quantguy
EURUSD before FED Today is the FED Interest Rate decision. This will definitely cause some moves which will present us with some trading opportunities. We saw price holding yesterday which probably means that the market is awaiting the news to find its next clear move. Like we said in our analysis yesterday, best case scenario would be to see price pushing up to 1,1200 and then a sharp drop to follow. That will give us great entry levels and we can then expect a continuation down. We're not looking to buy now or not even after the news. We're still following the downside bias and we're waiting for the best entry levels!
by ForexTrendline
15
Is the US Federal Reserve hiking 25 basis points tomorrow?The US Federal Reserve kicked off its Federal Open Market Committee (FOMC) meeting on Tuesday, with the markets widely anticipating a 25 basis-point hike in what would be the first interest rate increase since 2018. Fed Chair Jerome Powell had earlier raised the prospect of a 25bp hike, telling a House financial services committee hearing two weeks ago that he is "inclined to propose and support” the increase as inflation has sat above 2% and as the United States’ labor market continued to recover. High inflation underscores need for tightening With the US consumer inflation soaring to a 40-year high of 7.9% in February, a rate hike this week is highly anticipated, although uncertainty lies in how much the Fed will have to tighten to tame inflation. Markets are also pricing in up to six or seven hikes this year, one for each of the upcoming FOMC meetings. Higher inflation expectations among US consumers, according to surveys by the New York Fed and Cleveland Fed, also ramp up the likelihood of a more hawkish Fed. 50bp hike also on the table Although many market watchers anticipate a 25bp hike when the Fed caps off its meeting on Thursday, some economists say a 50bp is also likely. Last month, St. Louis Fed President James Bullard called for a full percentage-point hike by July 1. ING Bank’s Chief International Economist James Knightley in a note last week said it wouldn’t be surprising “to see maybe two FOMC members vote for 50bp.” Knightley and other economists from the Dutch bank most recently said markets are back to pricing 160bp hikes in six meetings in total for 2022, although the Fed may have five rate hikes planned for the year. Russia-Ukraine war places Fed in a precarious spot However, the worsening conflict between Russia and Ukraine, which has reached its third week, puts the Fed on alert due to expectations that the war could worsen inflation and result in a potential global economic recession that could derail the United States’ recovery momentum. Still, the Fed appeared to be undeterred by the crisis, with Powell saying in a recent speech to Congress that the near-term effects of the war and Western sanctions on Russia remain highly uncertain. "Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook,” Powell said. Squeezing household income A rate hike in the US — the first since the COVID-19 pandemic emerged — could further squeeze household income at a time when gas prices hover around record highs. Gasoline prices in the US surged to an all-time high of $4.33 on Friday, before retreating over the weekend, according to data from the American Automobile Association. Higher interest rates will raise borrowing costs in banks, lifting variable rates on credit card debt and affecting interests on auto loans and mortgages. This could further weigh on consumer’s spending habits.
by BlackBull_Markets
Bond Yields at Highest Levels Since 2019Bonds have edged out new lows as investors weigh deescalation of the war in Ukraine and increased expectations for a Fed rate hike . Yields in ZN, the 10 year treasury note, are the highest they've been since July 2019. We have sliced through multiple technical levels below, and have established new lows, yet again. We do appear to be seeing a brief pivot from lows at 124'19, but 125'07 is providing resistance confirmed by a red triangle on the KRI. If we are able to continue the rally and break through resistance, then 125'17 and 126'00 are the next targets above. If we continue to sell off, then 124'06 is the next target below.
CBOT:ZN1!Short
by quantguy
SPY COULD FORM A MACRO WEDGE - INTEREST RATESGet your tin foil hats ready for this one folks. It's a long shot, but just throwing this perspective out there to see how it lands in a few weeks. SPY loves to form wedges, especially after the breakout of other patterns. In this case, SPY was forming quite the strong channel since September, until it broke out in January (see chart below) Now that it has broken out, and volatility is at its highest, one potential outcome is SPY / SPX forming a wedge to calm the storm. Here is where it gets interesting - charts also love symmetry. The price action on one side of a pattern often times matches the price action on the opposite side as well (time is a factor that affects how this looks on the chart, either squeezing or elongating the trends) Before SPY dumped in January, it had a stair stepping, wedge-like pattern on it's way up - which took 200 days to reach ATH from $415 (a key level). SEE BELOW Now here is where the tinfoil hat comes on. So far, SPY has mimicked the double bottom formation first seen on the left side. SEE BELOW Notice both form a 'W' shape, with the left side having less volatility, and therefore having more time to form price action (30 days) The right side having more volatility, formed a similar pattern in 10 days. 1/3 of the time This would make sense if we also look at the volume, which is on average 2.4x higher than last September / October. Following this same logic, we should reach 415 in approximately 1/3 the time it took for SPY to reach ATH from 415 (200 days mentioned previously.) That means it would take ROUGHLY 66 days to reach 415 from ATH -- March 11 -- The Friday before the first released rate hike and when the FED will release their interest rate plans. This would put the March 15 - 16 FOMC meeting right at the vertex of this wedge. The MACD also confirms this in a way. If SPY continues its current MACD trend on the Monthly, it should approach baseline in March, flipping red (Take a look at SPY chart, and what happens when the monthly MACD flips red without a catalyst like the FED meeting.) It also means we could see a more volatile spike to around 460 in the very short term (first week of February or so) and then a trend down from there. What are some problems with this perspective? It's based entirely off of connecting dots that may not even be there. Also, with all of the news and volatility happening right now, SPY could do something completely un-organized and un-predictable, but it doesn't hurt to try. This post was written largely for fun, and I'll keep the analysis in the back of my mind. However, I do not plan on basing any of my strategies or trades on the idea alone. Let's see how poorly this ages ;) - Thanks for reading!
AMEX:SPYShort
by SJ_CAP
3
Growth vs. Value: Skating to Where the Puck Will BeHockey legend Wayne Gretsky famously said: "Skate to where the puck is going to be, not where it has been." This sometimes applies in investing and trading. Towards what object have investors been skating, figuratively speaking? Currently, financial media, fund managers, and commentators have been emphasizing the opportunities in value over growth for several months. And for good reason: Energy, a value / cyclical sector unloved for about a decade, has outperformed every other sector this year by a huge margin. It has risen by approximately 20.5% since January 1, 2022. Even it's uptrend channel could not contain it (although it looks to be consolidating at the moment or perhaps mean-reverting). Increasingly, market participants have been "skating" towards value areas and away from growth for over a year now, as anyone who has been burned by long trades in tech / disruptive innovation knows. For example, a spread chart (also called a ratio chart) of ARKK/SPY shows just how dramatically growth has struggled. ARKK is a well-known US ETF containing high-beta stocks typically categorized as disruptive-innovation stocks, i.e., high growth names. This chart evidences just how much growth has struggled vs. the S&P 500. Notice, though, how this spread chart shows how close to major, long-term support the ratio has moved. Examples abound of high-growth names having been crushed in powerful bear markets in those names. Some of them are even top names with innovative products and services and an impressive record of earnings / sales growth: Square ( NYSE:SQ ) has declined about -68% from all-time highs, Upstart ( NASDAQ:UPST ) fell about -81% from its high to its low in late January 2022, and ( Roku ) dropped about 78% from its peaks. Even large cap tech not gone unscathed: Facebook NASDAQ:FB suffered a nearly -50% decline after a huge earnings / guidance disappointment. But in general, large-cap tech has been the exception in growth until the selloff this year. While growth / tech in general has struggled for months, large-cap tech names such as GOOGL, AAPL, MSFT, and NVDA have outperformed. Even AMZN's sideways move for about a year should be considered outperformance relative to other high-growth names as shown by the ARKK chart above: see the chart below, which is a relative chart of AMZN vs. ARKK, revealing that even with AMZN's lengthy sideways move, it has dramatically outperformed growth / tech names more generally. Markets are in constant flux. So often, just when the little people (retail traders like me) take notice of a powerful new trend or outperformance, it ends. So I'm trying to watch for where markets are moving rather than focusing on where they are. In short, is growth bottoming out relative to value? Here are a few charts to consider. 1. The main weekly chart above (also copied below) is a spread chart showing the ratio of NASDAQ:IJT (small-cap growth) vs. small cap value. Notice how close to major long-term up trendline support the ratio has moved. And the weekly ratio is also right at support at March 2021 and May-June 2021 lows. The RSI for this relative chart also shows that it's oversold to 33.65, a level that only appears in multi-month (and often multi-year) intervals. Even the two RSI lows in 1H 2021 occurred 2 months apart, but this is the exception looking back longer term. 2. Large-cap growth is right at support at a long-term uptrend line. See the weekly spread chart of the ratio between XLK/SPY. AMEX:XLK is a US ETF that is heavily weighted towards large-cap tech. 3. Equal-weighted growth vs. equal-weighted tech RYG/RPV is also very close to long-term upward trendline support. 4. Interest rates are nearing long-term downtrend channel resistance—at the upper line (the actual downtrend line). Interest rates have soared powerfully since mid-2020, and the Federal Reserve has hawkishly signaled coming rate hikes, and market participants have behaved as though rates will keep on going to the moon—by selling tech / growth, which struggle when rates rise b/c of discounting of future cash flows used to value such names. The viewpoint that rates could turn around in the near future seems radical, contrarian and unreasonable. But consider this chart below. Could rates turn around just after a large move just after millions of market participants have been flocking towards value names that outperform in rising-rate environments? Some well-known experts have already taken this view. www.cnbc.com It seems priced into the market right now that the 10-year yield could continue rising, that the interest rates could even breakout higher above long-term downtrend resistance, and that the Fed is likely behind the curve in controlling inflation. It seems consensus that value could continue to outperform long-term, and that growth could break even long-term support levels and continue to plummet. But if this is priced into the market, shouldn't one consider buying what's already priced in? Especially because maybe what is priced into the market will not last. Thinking about where the "puck is going to be" may suggest that tech / growth is making a multi-month or multi-year low or that interest rates are going to pullback in the next few months, allowing tech to thrive again.
NASDAQ:IJT
by SquishTrade
4
What Will Happen to Crypto During a Recession or Stagflation?Inflation in the US markets hit 7.9% last month - while the Federal Reserve was claiming that inflation was "transitory" all of 2021, realizing the US dollar may be in risk of systemic collapse they finally started to consider the possibility of raising interest rates (it's been near 0% for almost a decade now) -- arguably their only weapon to combat inflation at this point. (As a reference, Russia's interest rate jumped to 20%+ after their stock market collapsed after their invasion of Ukraine in late Feb.) Increased interest rates means higher interest rates on loans, which is good for savings but bad for investment since loans become more expensive to do. Experts are predicting that a recession -- possibly a global recession -- is looming in the horizon. What does this mean for crypto? Given that crypto's massive jump in 2020-2021 took most people by surprise there isn't too much reliable data out there but there's a few things we might be able to discern based on a few data points: - Crypto adoption tends to be high in countries with unstable economies; the rankings vary from study to study but adoption rates in Ukraine was high, even before the war. (The US and Russia usually in the top 10.) It's interesting to note that the inflation rate in Ukraine in 2015 was almost 50% -- which makes assets like Bitcoin and other currencies much more appealing. If the major superpowers' economies become unstable, we may start to see similar patterns emerge as a result. (Japan's inflation rate has been very low for decades and their crypto adoption rates are also very low, despite being relatively friendly to the technology itself.) www.statista.com - In terms of raw numbers, India has, by far, the highest number of people who own crypto (~100 million+) but their inflation rate has been climbing gradually in a similar pattern to the US in 2021. (With the officials telling people the same exact story as the Federal Reserve in the US last year -- "don't worry, it already peaked." 😂). In the same vein, most developed countries are in the same boat as the US right now as the disruptions on the global supply chain (due to COVID restrictions) continues to push inflation higher almost everywhere. - In the short/medium term, the proposed solution by the Federal Reserve (a marginal 0.25% interest rate increase in March) isn't very likely to make that much of a difference until the Feds start to get more aggressive with the hikes. (Which they have considered as a possibility, but are wary of announcing since they know it may trigger a downturn in the markets.) Inflation is very likely to continue for the rest of 22', in other words. - As of 20-21' lots of money has been thrown at crypto, DeFi, metaverse, and NFT projects both in business and personal deals -- many of them tied to traditional contracts in USD or fiat. (Although typically ill-advised, some people have been taking out cheap loans for crypto.) As fiat currencies become weaker, these fiat-crypto hybrid contracts are less likely to become common place, but will still make "pure" crypto deals more appealing. We might be able to estimate how much fiat money is tied to crypto assets based on market presence - BTC is the highest, by far, followed by ETH, DOGE, ADA, SHIB, XRP, DOT, SOL, etc. Coins that relied on marketing dollars to stay afloat (since it's currently only spendable in fiat money) are likely to be the most vulnerable. www.globaldata.com - During bull runs like the ones we've seen in 20-21', marketing/hype tends to reign supreme since cheap loans and rising prices tends to create a short-term market for pump-and-dump projects. During recessionary periods, however, crypto projects with more utility is likely to come out ahead. (As Vitalik Buterin says -- he "welcomes" a crypto winter so that more serious projects can finally get the attention that they deserve.) But we don't really know if a weakened USD or fiat as a whole really will lead to a "winter" -- there is also the chance that fiat money will run to crypto as a refuge, pumping up the price as a whole. Traditional finance outsizes crypto by a huge margin, after all -- all it takes is a small % of the former to affect the latter in an exponential way.
Long
by RyanTanaka
3
Bonds Test LowsBonds have smashed through relative lows in the mid 126's to find support at 126'00 which appears to be a technical and psychological level. We have added this as a technical level on the chart. ZN has been on a clear decline falling 3 handles from the 129's to the base of the 126's. The Kovach OBV is on a steady decline, but does appear to be leveling off suggesting we may find support here, or at least that the selloff may ease up. If not, the next target is 125'17. We do appear to be severely oversold and if we see a technical retracement into the bear trend we must break 126'11, where we are currently meeting resistance as confirmed by a red triangle on the KRI. After that, 126'19 and 126'28 are targets.
CBOT:ZN1!Short
by quantguy
The importance of Gold & its current price actionMany people consider gold as an inflation hedge, but the truth is that Gold in the present day is more of hedge against policy errors or catastrophic scenarios in broadly. It is more like insurance which could also appreciate in a scenario where real rates are falling. In case for whatever reason the financial system breaks, then gold is probably one of the best assets to hold, especially in physical form. Russia for example has been adding to its Gold reserves and could potentially add a lot more to it if possible, as we have seen that all these sanctions could do a lot of damage on the FX reserves it is holding abroad. So not only the conflict between Ukraine and Russia 'boosted' the price of gold due to all the issues it might cause to the financial system, but also all the uncertainty on an already stressed out system and all the potential money printing that will ensue shortly, have the potential to really take gold even higher. Gold is currently above its 2011 ATHs and the overall price action is very bullish. XAUUSD has broken above most major levels and has retested every single one of them. When the war broke out, it pumped straight to 1970 and then pulled back below the level it was before the war started. Every single breakout has been retested, as even the recent gap up after the nuclear threats was filled. 1910-1920 was the 2011 ATH and recently was resistance that turned into support, while it was also the weekly Pivot. The market bounced on it perfectly and closed the week with immense strength, right its most recent peak. Although it hasn't fully broken out yet, at least not above its GLD 2011 ATHs or generally its recent 2020 ATHs, the strength and the case for Gold is certainly here. In my next ideas I will mention why Gold isn't potentially the best play on inflation, but this doesn't mean it isn't an asset to hold regardless of how high or low inflation might be. As the final chapter of the 4th turning has begun, Gold could really reach 5000-10000 in the next 3-5 years, as breaking above this massive cup & handle pattern would be massive. 10 years in the making and it could really take gold even higher than that, as the devaluation of fiat escalates rapidly. I wouldn't say bet everything on Gold for sure, and I think in the long run Bitcoin is going to do better, while there is also still a chance we see a massive dollar spike that sends gold anywhere between 1350-1650. So be aware that even gold isn't 'riskless' in this environment. Finally some thoughts and ideas on tokenized gold, is that I find it pretty interesting and a decent bet. PAXG and XAUT had some spikes significantly higher than the actual gold price, something that has happened before too. I am using the price of PAXG on Kraken which has seen many spikes before, which could be seen as a potential way to get yield on your gold. By setting sell orders 5-10% higher than the spot price, just in case there is a spike and you are able to make a decent amount and then rebuy lower. You can even go long or short on various crypto platforms even on weekends, which makes it even easier to trade while news occur on weekends.
FX_IDC:XAUUSDLong
by BitcoinMacro
3