SPX Short, Recession incoming?Potentially SPX falling even more. The macro/geopolitical situation is not looking good. This week will be very important.
Recession
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.)
- 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.
- 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.
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.
Visualizing Yield InversionWhen investors have a poor outlook for the economy, what do they do? They buy the longest term debt they can because it's one of the ways to price in the uncertainty of "right now" into the long term. Therefore, rational actors would do something like this:
Buy 30 year treasuries. Buying ensues, yield goes down, price goes up. Eventually 20 year yield becomes greater than 30, as described in purple. Right now for example, you'd get about 3% more yield buying the 20 year VERSUS the 30 year (note: relative yield, not nominal yield), giving us a purple line of 0.968.
The teal line (1.0) is where the relative yields are inverted if the price is below this line. Short term debt pays more than long term debt under this line, which is usually not the case and signals that things are awry.
Now simply repeat this cycle until the rational short term outlook is priced into all irrationally priced long term treasuries. Prices are too low, therefore yields are too high, and rational actors begin buying them. Prices go up, yields go down.
Next up, we have 20Y/10Y (red) at 1.235, which is intriguingly lagging behind the shorter term inversions of 10Y/5Y and 5Y/2Y. If anyone knows why, I would be interested to know! I'm not exactly an expert on debt.
Eventually this cycle repeats until the ratio of short term yields are all very close to long term yields. These conditions always precede a recession, which, by the way, is NOT a well defined term. A recession simply describes "a general decline in economic activity". Not very scientific, is it? Economists utilize a wide range of data to attempt to foresee a recession, yet the outcome is inevitable and uncontrollable. As history shows, any attempt to control the economy and avoid recession (1930s, 1970s) often make things much worse than had policy makers simply let the storm pass initially.
I like to use ratios of yields. Some people subtract the yield of one from the other, which is fine too. I think a ratioized signal is much more pure as ratios rule the world around us. Not only that, given that we're monitoring multiple relative yields, we can get a good overall picture of the current landscape.
Unfortunately there's not much history for the longer term instruments, though as I believe the 30 year has been around for atleast 50 years but only has a few years of TradingView data.
Hopefully the illustrations on this chart along with relative yields help you visualize some of what's happening. I keep this chart of relative yields up ALL the time in a tab! If you have any feedback or comments, I would appreciate it.
Good luck and hedge your bets!
Quick note: In March 2020 not only did the FED setup new centralized repo facilities directly (reverse repo, unprecedented, it's ILLEGAL by the way) and at the same time, engaged in "QE Infinity". In essence there's more avenues at which they are "forced" to buy things that nobody wants. Albeit, they buy it at about market price, assume that's the right price and that they are somehow protecting the economy by pricing in bankruptcy in one asset class and spreading it to the rest of the economy. Belligerent and thoughtless, what more could you want? At the same time, they've sucked a lot of excess cash out of the system once again by offering banks an interest rate of 0.05% for their cash in exchange for some FED junk assets. So suddenly banks are bagholding assets nobody wanted, in order to get interest on their cash, genius huh? OH yeah, and banks are SHORTING those assets on the open market! Effectively making the cash tend towards zero value (the real contract value of those assets which were originally exchanged). Next time something goes wrong, they will unload this ~1.5T diaper of dollars directly into our faces, probably sooner than later, causing more inflation.
Can technical analysis infer the result of Fed Tightening?This chart uses a simple downtrend in order to predict the terminal fed funds rate, which I believe will be 150-175 basis points by March 2023. As we can see, the previous fed funds rate hikes under the current downtrend have resulted in periods of lower GDP growth as well as yield-curve inversions and very regularly precede lows in total US jobless claims (the two criteria for a slowdown to be considered a recession are two consecutive quarters of lower GDP growth as well as a trough in unemployment). Historically, sharp increases in oil prices have been consistent indicators of economic slowdowns and very rarely move to the upside with a significant degree of magnitude without preceding a recession or at least a period of stock-market volatility.
2022 RECESSION (Wheat Price Shock)The price of Wheat is going parabolic and most of you are wondering, does this spell a recession?
Historically, almost every time wheat prices spiked; a recession soon followed.
In the early 1970's when wheat prices peaked, the markets pulled back 41% in about a year.
Then, in the early 1980's, we saw the market pull back 23% in about 600 days.
Interestingly enough, in 1996 when wheat prices soared, there was no recession.
Lastly, in 2008, we see the market pull back 44% in about a year.
For the record, a recession usually follows a wheat price shock but not every time like the one we saw in 1996.
Now the question is will this time be different or WORSE because we a shock in the oil markets, wheat markets, and we have an ongoing war between Russia and Ukraine.
Let me know in the comments below what you think. And if you liked this post, make sure you subscribe for more.
Thank you!
Early signs of recession When the West were cheering Russian sanctions, seems that no one consulted them properly with people that have to make key economic decisions on regular basis like J Powell. For anyone interested I recommend this article www.zerohedge.com .
While current continuation into more established bear market might look like any other short term turn to risk off, the angle and consistency at which stock markets are dropping paired with information like above does suggest we are only at the beginning.
My next target for a short term bounce is around 12000, but if things go as some data suggests I would not be surprised to see us closer on IXIC to 10000.
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US100 ShortI predict that US100 will follow this trajectory down to a tee. Let me know your thoughts.
GLOBAL RECESSIONWe are reaching extremely high Futures prices in the commodities sector. It's a bit worrying especially since these prices are approaching 2008 levels, some are higher.
We might see a global recession, and it can be triggered by a black swan event (The Russian war could have already started this catalyst) and a global Inflation that doesn't seem to slow down.
So what to do? try to time a crash? Play shorts/put options?
Personally, I think it's better to hold cash and buy up stocks/etfs that become dirt cheap.
You have higher chances of making serious gains buying the BIG DIP than trying to pull a BIG SHORT
Here is Wheat Future's monthly chart.
You can see that Wheat is reaching 2008 peak recession prices.
Wheat also gained almost 60% in the last month alone. This means that the price of food HAS to go up = More Inflation.
Oil is doing the same thing.
y
Copper hit all-time high
Oil is out of controlOil is heading to 2008 prices really fast.
This will trigger global inflation .
USOIL: Possible signal for Recession?Here is a perfect example of why Energy Prices soaring is very dangerous for the broader economy. The Ongoing war in Ukraine against Russia and the threat of limiting Oil imports from Russia will keep these prices soaring for the foreseeable future. War does not care about market patterns.
Each time there has been a significant deviation from the trend paired with high Oil prices, it has triggered a Recession. This has happened 6 times since 1970. I can only show 3 examples here because of chart limitations. We could be faced with the 7th time as the recipe for this to happen seems to be stellar at the moment.
With the Macro environment as it is with a weakening economy even when rates are at 0, the FED is going to find itself in a very tough spot. Pair this with the ongoing war, a threat to Taiwan by China, possible Global Recession, High Inflation , Energy prices soaring (which is possibly the most important thing to take note of here), the chances of all these factors coming to the same conclusion grows by the day.
I think the chances of a recession have multiplied at this point and I'd wager the FED is fully aware of this. They could potentially pivot here and instead of letting it happen, they may want to cause the recession to give themselves breathing room to work with. As odd as it sounds. Since a recession comes both ways.
It is more logical to Raise Rates + Taper as you don't want a recession hitting (which it is) with Rates at 0 and QE. And they cant lower rates at 0 or even worse inject more money.
The FED causing the recession has happened before in the 1980s when the FED was headed by Volcker. Just recently Powell was asked, "Are you prepared to do what it takes to get inflation under control?" to which Powell responded, "I hope history will record that the answer to your question is Yes".
Pair this with my $AAPL analysis and a similar picture might start to present itself. Only time will tell.
Thank you for checking out the analysis, if you have any questions or comments please leave them down below. Interesting in getting your opinions.
NADAQ - Recession is hereWith the Russia - Ukraine conflict, things got really heated with the economy.
The whole economy should see a big downward move heading into the war and here are the main support points.
How long this will last is not something that can be predicted, however, the economy has been trough so many wars and in the long-term, it will recover.
Now would be the time to either have some cash on the side-lines or shift towards safer investments that would survive the likely recession.
Prayers to all of Ukraine!
BTCUSD - Global Economic CollapseThe Great Reset Is coming swiftly manage your risk accordingly by exiting every market.
People have been disillusioned that in the event of a black swan BTC will not follow traditional markets yet looking back at March 2020 you will see.
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Real Estate Is Rolling OverToday we are taking a look at the Case Shiller Home Index on a year-over-year chart as well as a price chart and using basic, long-term technicals to identify issues and opportunities. I believe we are heading into a recession over the next few years but we will have to see what crazy government program is created to fight that recession that maybe boosts housing back up. Don't forget in 2009 they were printing a ton of money and it didn't save the housing market. I believe home prices on a national level will fall between 25-30% by July 2025 and July 2026. This will depend on if we get UBI, a war, or major hikes in interest rates to fight inflation. Although, I don't believe the FED can hike rates too high because we can't afford the interest on the debt then due to the short-term rollovers.
Overall, I am bullish on cash flow real estate in growing areas with growing incomes that have freedom in mind. These areas are experiencing growth at a high rate but some of them are getting overheated. On a national level, I expect this all to play out over 3.5-5 years.
Make sure you comment below. Argue your points with others, like, follow, and watch an ad if one pops up to support free information. It only costs you a few seconds.
US Federal Funds Rate (FF) vs the SPXIncreases in the US Fed Funds rate during the FED's hiking cycles have always preceded a recession.
A simple analysis of the most recent recessions, the amount of rate hikes preceding them and the downward trending channel in which FED Fund Rates have moved suggest the FED only has room for 150bp worth of hikes (or a total of 6 hikes).
OANDA:SPX500USD FRED:FEDFUNDS
Why are Netflix shares down 30% in 2022?Netflix (NASDAQ: NFLX) shares have tumbled 30% YTD, similar to its tech brethren, who have by-in-large, been facing huge downward pressure. For interest sake, NFLX was down 37% from its all-time high in November 2021.
Two major events have eaten into the gains that NFLX made in 2021. The first is investor confidence waning in growth stocks in the face of looming interest rate rises. And the second has perhaps had a greater impact; a tepid earnings report.
Netflix shares experienced a significant sell-off two weeks ago, after releasing its Q4 2021 earnings report. The report noted that the pace at which Netflix is adding subscribers is slowing. Such a declaration typically spooks Netflix investors, who steadfastly hold the streaming platform still has plenty of room to grow and shrink its price-to-earnings ratio.
Before Netflix’s share price dipped by 30%, its PE ratio was ~60.0. As it stands, with Netflix trading at US $429.48 per share, its PE ratio is now ~38.0.
Netflix finally admits it is facing tougher competition
Typically shying away from doing so, Netflix has finally revealed that competition is hurting its subscriber growth. It is this admission that caught a lot of investors off guard.
In the past three years, Netflix has had to contend with a wave of competitors entering the streaming market, such as (in order of appearance) Apple TV+, Disney+, Peacock, HBO Max, and Paramount+.
The penultimate newcomer on the above list, the premium-placed HBO Max, has been the fastest-growing service of late, vastly outpacing Netflix and adding 73.8 million subscribers last year.
Similarly, Netflix is hurting from older streaming services increasing the appeal of their content libraries and raising investment in content creation. One such competitor, Amazon Prime, increased its spending on content by 41% to US $11 billion in 2020 from the previous year and have recently bid US $8.5 billion to acquire MGM studios and its content catalogue.
2022 looks to be a pivotal year for streaming
Will 2022 be the year that consumers start weaning off the numerous streaming services to which they are subscribed? As prices climb, this may be the likely outcome.
In this respect, Netflix may be on the back foot, having recently pushed its prices up to US $15.50 per month for its standard package. Netflix is now more expensive than the more ‘premium’ HBO Max at this price point.
One factor that could influence the price of Netflix shares over the year is whether their competition hikes their respective prices. For one, Disney+ might be expected to raise its prices before June, as its bargain pricing (introduced one year ago) becomes increasingly unsustainable. However, its attempt to hit ambitious growth targets may delay price hikes from the company.
If pricing over the different streaming services become more equitable, content becomes the deciding factor for consumers. Netflix, and Netflix’s share price, will be in a better position in this scenario as consumers by far prefer Netflix content over its competitors. As such, In 2021, even as competitors pumped funds into content creation, Netflix’s hosted 14 of the top 15 most popular TV shows and Movies.
CHANCES FOR NIFTY TO FALL ?Only an illustration of market considering a long term in monthly chart.
The big question is will history tend to repeat itself?. The analysis shown here is just a view on the market considering the theory behind the market and also taking into account about the 100ema as well as possible retracements.
This is why the market needs to be approached by a completely neutral position.
React accordingly, catch the big bull if markets collapse to similar levels
S&P 500 - IS THIS A CRASH/ OR HEALTHY CORRECTION TO AVERAGEAbove is a chart of the S&P 500 since 1950 (adjusted in Log). The yellow line represents the mean (average) price. It is well known that price naturally gravitates towards the mean, always!
Notice how the price of the S&P 500 has not had a significant drop below the mean, since the early 1980's. It had a brief stint below trend, during the 2008 financial crisis.
Why has the S&P 500 not had a significant dip below the mean since 1980? Is it a booming economy? Is it an educated and financially literate workforce? I will talk about this in a future post. For now, I just want to pose the question and get the cogs turning. What has caused the high deviation from the mean in the past 30 years, and specifically the past 12?
I want to throw this other statistic out there. Interest rates in the 80's were around 16%. Today? The lowest they have ever been. Less than 1%.
Form your own hypotheses, and please share them. I'd love to hear your thoughts.
The start of a long train wreakSo in conclusion, with the merals issue, supply issue, housing issue, inflation issue, investors heads in the sand issue, tech issue, incompetent leaders (all of them) issue and FED issue. This chart being a fraction of a fraction of a percent from inversion in 10-7 and already inverted in 30-20 makes more sense then the random PPT rally an hour before close today.
The trajectory in my honest opinion is downward for markets and the economy and inversions in the bond market. It appears the bonds are signaling a new black swan, this we will have to wait and see (reference .com, 08, 2014 and the pandemic for more)
There will always be gains and plenty of ways of making money during this downturn, always is. Nothing goes straight up or down without the inverse being true too. I am calling for a missive recession, tho this is just my opinion.
Let me know what you think? Can the FED save the day? Do you see a recession? I want to hear your thoughts below.
The start of a long trainNote: FEEVRWS is only meant to be a analysis and early warning system, and is in no way a substitute for your regular work. Please do your own due diligence and if needed, consult a trusted professional.
Today we will be looking at economic correlations and why bonds are moving the way they are.
As of right now the 10y and 7y are a quarter of a quarter of a quarter of a percent away from inverting and a inversion percent in the 30y to 20y is as much currently. 30y to 20y is already inverted. There are MANY reasons why and this is not so simple. Bonds are selling off across the board with only the 1mo remaining the same. Tho today seems to be about flat, the trend continues.
Housing, rate hikes, savings, inflation, liquidity, fomo speculation and foriagn investments are all tied to this and as a result the analysis will continue with other charts produced today
MARKET WONT CRASH YET BUT IT'S GETTING READY FOR THE DECLINEGreen Arrows show when price increases beyond midpoint of the band, it started a significant decline in the market. As of today, it hasn't shown that yet
Red Arrows Show that during those times of market "correction(2000,2007,2008,2018,2020) it exceeded the ATR lows to show a warning sign. Market usually corrects after this, institutions take profit on the bounce, and market increases volatility and then sells off.
Crash this year or later?Eventually spy will collapse on to that long term growth line in white. For sure it will happen, not sure when, it could be by the end of this year or even next year.
We may have a bounce here and there, with high volatility. Fed meeting in March could accelerate or decelerate the eventual collapse.
Growth stocks have already collapsed more than 50% and may not recover, could see more drops. There could be immediate dead cat bounce in the coming days.
Be cautious moving forward.
