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The Problem With JapanIn this video we discuss the current macro economic problems facing the Bond market and anticipate that regardless of what happens we will see dislocations (volatility) in a number of different markets. The problems with Japan stems from their monetary policy to implement Yield Curve Control (YCC) where they are committed to keeping their interest rates between +0.25% & -0.25% with the targeted rate as 0%. As global inflation is hitting consumers hard and all over the world central banks move to increase interest rates & lower economic stimulus introduced during COVID-19, Japan's 10Yr Government Bond (JGB) Yield is at the upper limit of their band (currently trading at 0.22%). As the Bank of Japan (BoJ) now steps into the market and buy as many bonds as required for the market to maintain the desired interest rate it could very easily start to drag other global bond yields such as the US 10Yr Bond lower with it... the exact opposite of what central bankers want right now in order to battle inflation. Its situations such as this that historically have meant inflation runs out of control and causes catastrophic impacts on the economies of the world, or the flip side to this situation is that Japan is forced to abandon the current band of YCC and accept the inevitable negative effect this would have on both domestic and global Stock markets. My prediction for how this plays out is that at least for the meantime the global market follows the JGB Yield and starts a correction until this starts to cause real issues for inflation to the extent that central bankers start introducing things such as emergency rate hikes... essentially central bankers may hope they can get away with no increasing rates because they analyse inflation to be "transitory". In this situation I will be looking at the following trades: USDJPY Short Gold Long Nasdaq Long Let me know your own thoughts in the comments below & feel free to share this with any friends.
TVC:US10Y
by JoelWarby
3
US10Y in-depth analysis - Why I think we will see Gold above 2k In this video I am going to show you why I think that we will have a major decreas e in bonds price this year. This is due to the fact that we are currently trading in a wedge shape , or a so-called Elliot Wave Diagonal which is characterized by a 5-Waves-Pattern , of which every inner wave is shorter than the first impulsive wave. Fundamentally spoken, I do assume that rate hiking might already priced in the current Dollar and Bond prices. Therefore FED rate hike announcement might be the catalyst for several sell-off waves. If you liked this analysis, please leave a like a comment and a subscription. Thanks. RT
TVC:US10YShort
0
by RT_Trading_
2
In depth analysis of bond yields & the USD! Macro series pt2Part 2 This is the second part of the macro analysis series. In this part we'll focus on analyzing the current situation around the US bond market and the US dollar, while trying to map out the future depending on how the Fed and the economy move. You can find the rest of the analysis on the links down below. After going in depth about interest rates, the USD, the Fed and the economy, it is time to accompany everything with some charts. In the first chart we have the 2year yields of US government bonds which have been in a downtrend for more than 30 years. Based on technical analysis there is resistance for yields at the 1.3-1.5% zone, as well as 2-2.5%. The fact that we are so close to the first resistance is matching well with the fact that after the first rate hike the Fed might not raise rates again, and rates might actually start falling again. Even if that’s not the case, if the Fed tries to push the narrative that it will raise rates even more, we could see the 2y bond yield go up to 2% and stop there, by respecting the long-term downtrend. That also goes well with the fact that inflation could be potentially coming down and even be below 2% by the end of 2022 or with the fact that at that point markets might start to collapse, forcing the Fed to lower rates again. In the second chart we have the 10year yields of US government bonds, and the downtrend in this one is much cleaner. This one is very close to major resistance already, yet it could climb up to 3-3.5% before it tops. Breaking above the resistance channel doesn’t mean the downtrend is broken until we get a close above 3.5%. It is key to note that both charts are showing major signs of long-term bottoms, which could last for years but until we see these trends break it is early to confirm a reversal. For example, the 10y reclaimed its 2012-2019 lows and is showing some strength, while the 2y has had a perfect round bottom and is currently going up strong. The truth is that their bottoms in March 2020 really look like a proper capitulation bottom, ones that could signal the end of a major downtrend. By looking at the actual price of long-term bonds ($TLT, $UB etc), we can see that they had a proper blow off top. Before we get into our views on bonds though, something we need to clarify for those that don’t know much about bonds, is that bond yields are inversely correlated with the price of bonds, which means that when yields go up, bonds go down and when yields go down, bonds go up. Therefore, the blow off top in bonds could be a major signal that bonds have bottomed for good (yields could be headed higher). To an extend the current drop in bonds could be attributed to the fact that the same way the pendulum swung too much on one side and it is now swinging on the other. This is a pretty reasonable assumption as the bond bull market has been raging for years and in Feb-Mar 2020 it got extremely overbought. Hence shaking out traders who believed and still believe that yields would turn negative soon might have to suffer for a few more months or years before they see their ideas play out, if they ever do. Having said all that is we need to remember that the blow off top was accompanied by some fairly strong actions by the US government and the Fed, in order to save the bond market and the economy, both of which were under immense stress and almost collapsed. Nearly 2 years later and all the support is being withdrawn as the government has cut down its spending, the Fed will raise rates and shrink its balance sheet, and the pandemic seems to be over as Covid has become endemic. These are having notable effects on markets as the 2y yield has been rising faster relative to the 10y and they are now only 60 basis points apart, while in March they were 160 basis points apart. That means that the yield curve has been inverting, which is a major signal that future growth expectations are muted, yet another sign that the Fed might now be able to raise rates much. Essentially the bond market is telling us that there could be some short-term inflationary pressure and growth, but in the long run we won’t have much growth or inflation. Finally, the last key observation is around the Fed doing Quantitative Tightening (QT = shrinking of the balance sheet), which empirically tends to depress long term yields. Usually when the Fed buys bonds, yields go up (when in theory they should go down) and when the Fed sells bonds, yields go down (when in theory they should go up). The reason behind this is that when the Fed buys it creates a risk on environment, so the banks that sold them their bonds go buy other riskier stuff, and when the Fed sells it creates a risk off environment, so the banks that buy the bonds want more bonds. To sum it all up again and put it in a tradeable idea, we could see yields trade higher and higher, and actually peak in March around the time the Fed plans to stop purchasing bonds, a clear buy the rumor sell the news idea. Next chart is the USD Index, or else known as the DXY. I’d like to start by saying that although this isn’t the best way to measure the performance of the USD relative to other currencies, it is the most commonly used one. Just a few days ago the DXY had a major breakout with a lot of strength and it could go higher, despite the fact that we didn’t get immediate continuation. Since 2015 the DXY has essentially been going sideways, and has formed a pattern that looks pretty similar to 2008-2015 period, something someone could call accumulation or in this case re-accumulation. In our opinion the probabilities of the DXY getting to 112-120 first are slightly higher than getting to 80-84, as the short term and long-term trends are bullish, while the medium-term trend is neutral. Of course, it wouldn’t be surprising if it gets to 80-84 to bottom and then go to 112-120 if things get very volatile with Central banks and especially the Fed taking a lot of actions. In case it goes above 105, then the Fed, the US government and other Central banks will seriously have to think of a way to devalue the USD or there is a risk the global economy will face extreme problems. Despite the fact that these problems could be somewhat preventable, taking any sort of action now will probably have a huge political cost. Everyone wants a weaker dollar as most people owe dollars, not own them. The world is short on dollars, banks in and out of the US aren’t really creating many new dollars, the Fed isn’t creating dollars and yet more and more people rely on the dollar as a store of value or as a medium of exchange. Eventually the world needs to get off the ‘dollar standard’, though this is more likely to happen when push comes to shove. Governments and Central banks will eventually find a way to devalue to the dollar and transition to a new system, but they aren’t ready yet and this is more likely to happen after we get another major financial crisis.
TVC:US02Y
by BitcoinMacro
Complete Macro AnalysisHello everybody! This is a follow up on my 6-part traditional and crypto market analysis, yet everyone that reads this one will benefit greatly, regardless of whether they've read any of the previous analyses or not. Over the last week I provided some updates on each part, however it currently makes more sense for me to make a brand-new holistic analysis, rather than provide small updates on each part. This one will be focused entirely on traditional markets, while the next one will be focused entirely on crypto. In order for anyone to have a better idea of where markets might be headed next, it is best to start with the bond market. Bond yields have been rising across the world and across the entire curve, with the big distinction that lower duration bond yields have been rising significantly faster than long term ones. The main reason that this is happening is that bond markets are expecting Central banks to raise rates a few times in the next 1-2 years, but don't believe they can do anything more than that. Essentially the market sees inflation being transitory, that the global economy is in a bad shape and that Central banks are in such a terrible spot, that by the time they raise rates a few times, they will be forced to start cutting them again. Based on the charts below, it is clear that bond yields are still in a massive downtrend. The 10y yields have started hitting resistance, while yesterday we got the first rejection at resistance due to the Russia/Ukraine news. It is pretty normal for people to seek safety at times like this, by buying bonds (bond yields and bonds are inversely correlated). So, as you can see on the third chart, the minute bonds got to support and the news started coming out, the bond market bounced. Although I wish that war between Russia and Ukraine doesn't happen, and actually believe it won't happen, in case that it does happens, the Fed gets some room to not raise rates. For many reasons that I mentioned in the previous analysis, it is clear that inflation will come down significantly in 2022 and there is very little the Fed could do about it anyways. Therefore, any excuse they might be able to use to not raise, they will probably use it. Having said all that, bonds are still in a short to medium term bear market, and could fall another 5-10% before they put in a final bottom (yields going up by 0.5-1% from here). Now the situation between Russia and Ukraine doesn't affect markets just because it affects the psychology of people or because governments print money to cover expenses of war. There are several severe implications around trade and resources, as a lot of trade especially between Europe and Russia could stop, while Russia is a major exporter of commodities, primarily of Oil and Natural Gas. Europe and the entire world were already facing serious problems around energy, and this could make things even worse. Again, for many reasons mentioned in the previous analysis, there isn't enough oil above ground or oil production to cover the needs of the world at reasonable prices. OPEC isn't even able to meet its production increase goals, let alone be able to handle Russia not giving oil to the rest of the world. Oil is already pretty expensive relative to where it should be given the current state of the global economy, and based on the charts it could go significantly higher. So far, the market has behaved as I had expected, with a rise up to 92-93$, a pullback and now another push higher. It's not yet clear if the current situation will boost oil prices above 100$, but it is certainly possible. In the short term it is easy to see a mini 'speculative shock', that could send crude up to 115-120$, only for it to then come all the way down to 75$ and find support there. What is interesting to note is how Gold has been able to hold its ground for so long, despite bond yields going higher. Not only that, but it currently sits above all major moving averages and pivots, while it has also broken above its key diagonal resistance. The truth is that the breakout isn't as decisive as one might have expected based on the news that came out on Friday, hence it might be a trap. It’s clear that the breakout was heavily affected by the the Russia/Ukraine news and that could be the catalyst for a gold bull market, but it’s still prudent to be cautious. What is even more interesting is that Gold has gone up, while most Central banks are raising or plan to raise rates, and while the USD has been going up since early 2021. In my previous analysis, I mentioned how I thought gold going up or down is more like a coin toss, as there is a strong case to be made in either direction. Some people took that as me being bearish on Gold, while what I had said was that above 1930-1940 gold might be tremendous for going long. Personally I prefer to buy strength and simply sacrifice some gains, in order to avoid being stuck in a trade that doesn't do well. A few weeks ago, the ECB hadn't even talked about raising rates, but now they have. Right after the Fed meeting the EURUSD pair had a major reversal that accelerated when the ECB started turning hawkish. My initial thought was to watch Gold closely, as now 3 of the 5 major Central banks are raising or talking about raising rates, yet gold remains strong. At the moment EURUSD has been rejected at resistance with an SFP, yet it still has some room to the upside. It's above the 50 DMA and the diagonal, so if everything goes well and tensions get resolved peacefully, the pair could easily get to 1.15-1.17 by the next Fed meeting. The USD seems to already been losing steam as the yield curve is flattening and there are already 7 rate hikes being priced in. Hence the ‘real’ news isn’t that the Fed will raise rates by 0.25% in an emergency meeting or that it will raise rates by 0.5%, but that the ECB might raise rates after an entire decade, as well as that all Central banks will be forced to cut rates relatively soon. Therefore, this gold strength could also be an indication that many investors are betting on a policy error by Central banks, which might be forced to reverse course faster than people expect. What people need to know, is that gold doesn't behave like most people think it does. Gold in our age, is more like an error/catastrophe hedge, that tends to follow real rates. For example, today Gold could benefit from two things: 1. A war is definitely a big boost for gold, as people might want to own it because it is of limited supply and has no counterparty risk, and it can easily be owned anywhere. Countries that go to war tend to devalue their currency or even seize assets, or that country itself could be excluded from the global financial system, like being kicked out of the SWIFT system. In such a situation gold tends to offer tremendous certainty, while nothing else really does, not even US treasuries. 2. When Central banks are cornered or have no real control over a certain situation. Currently it is obvious that Central banks are trapped, and that there is another major 'catastrophe' lying ahead. The world is stuck in an environment of low growth and too much debt, with markets being significantly overleveraged. None of the problems over the last 20-30 years have been solved, only papered over, hoping that the system magically heals, with the last 13 years alone being full of examples of them always acting late. Finally, the key reasons why gold hasn't done well during a situation of deeply negative interest rates, is that 1. Gold had rallied significantly since 2018, 2. There were lots of different, more compelling opportunities out there, 3. Everyone was already prepared (nobody else to buy + people had to sell gold as inflation increased to covered other costs, essentially using their insurance), 4. Most of the inflation wasn't caused by the Fed / Central bank actions. After having gone through all of the above, it is definitely time to talk about stocks. Once again I’ll focus on the top 3 US indices, SPX, NDX and RUT, as they can give us a pretty good idea of where stocks are headed globally. In my previous analysis I mentioned how I expected a bounce, a dip and then another bounce, which all pretty much played out based on my technical analysis, with one exception. The last move up was shorter than initially expected, however even based on my tools I was probably 'too optimistic'. Starting with the S&P 500, we can see how the bullish channel was broken and significant downside followed. Then the market had a strong bounce off the 300 DMA + horizontal support. After the bounce it got rejected on the 100 DMA + diagonal resistance + horizontal resistance, and fell down to the 200 DMA where it bounced. What is odd to me is that the bounce ended with a double top, rather than getting up to the 50 DMA and test the diagonal, while forming an SFP. A double top there is somewhat bullish in the short term, as it is an area that the market will probably break before making new lows. At the moment the market is sitting right at the Yearly Pivot but has broken below the 200 DMA, a situation that is neither very bullish or bearish. As a whole the momentum is indeed pointing lower and this isn't a great picture. In turn the Nasdaq 100 is actually looking much worse than the S&P 500, as a lot of the big tech behemoths have been taking several big hits recently. Slow growth, higher inflation and higher interest rates, are definitely not beneficial for these companies. For example, we saw a massive gap down for Facebook after a disappointing earnings report, a gap similar to what happened in June 2018, with the NDX going down 19% from that point in the next 6 months. Tech stocks have massively outperformed everything else since 2009, and pretty much everything compared to where they were in Feb 2020, so it is normal to get some extra weakness in this index. At the same time several parts of the stock market started peaking throughout 2021, with mid Feb 2021 being a major inflection point. At that time many unprofitable tech related companies had reached bubble territory and started reversing, but the effects of their valuation getting crushed started having an impact on NDX three months ago. The third index and final index is the Russell 2000, which looks like it was in distribution for about 10 months, while a few days ago it had a throw back into resistance. The RUT had a really strong breakout in Nov 2020 and by March 2021 it was up 35%. Then in September it formed a clear bull trap that led to the major leg down. Once the 2100 support that was tested multiple times for about a year was broken, it became clear that more downside would soon follow. At the time of my previous analysis, I mentioned that we'd probably see the Russell retest that support and flip it into resistance, which happened as expected. Now the index is below all major moving averages and Pivots, and is still looking bearish, even though in the short term it has shown a decent amount of strength. Until it reclaims 2250, it remains in bearish territory and it is probably best to avoid going long, Based on all the above, things overall aren't looking great. At least not in the short to medium term, for the economy and the stock market. Central banks are trapped and most investors are aware of that, and now there is an extra variable, that of the conflict. So the question then becomes, if everyone is aware of all of this, couldn't the market simply go up from here? Aren't lots of these things priced in? Aren't wars said to be good for the stock market? Well, like I mentioned above all of these are correct. It is true that due to the conflict we might see bond yields roll over and we get more stimulus from central banks and governments, both of which could push stocks higher. However, in the short term there is a lot of uncertainty due to the way many things will get disrupted in the world. Because of that gold and oil could go ballistic, hence they are the best bets at the moment. It is probably best to stay away from stocks for now, as their potential downside is substantial, while their potential upside is limited as they need some time to recover. Nothing in the charts really suggest that they are ready to go up hard any time soon. Let's also not forget that stocks would have eventually deflated to an extend, regardless of what the Fed or what happens in the world, as the 2020-2021 frenzy couldn't last forever. Of course this doesn't mean that I believe a major bear market is in play right now, just that the SPX could eventually get to 3900-4000 in the next year, that the NDX will test its major log diagonal and that the RUT will its 2018 highs. Although I don't know how or when we get there, to me the most likely scenario is that within the next 2 years bond yields will collapse and the government will be forced to spend a lot, while the Fed is forced to cut rates and do QE. Even if the yields don't collapse and inflation goes rampant, the US government will still be forced to print and spend a lot, something that would make the problems worse. In conclusion, despite the fact that I was mostly bullish on stocks and oil through 2020-2021 and neutral-bearish on gold, my stance now remains bullish on oil (buying dips anywhere from 55-75$), neutral-bullish on gold and neutral-bearish on stocks. For me to turn bullish on stocks again, I'd either need to see certain levels get to the downside or reclaim certain levels to the upside, or some extreme action by central banks or governments. In terms of US bonds and the US Dollar, the picture is not as clear. In early 2021 I was bearish on bonds, but after that I was bullish as I didn't really expect the Fed to raise rates and thought bonds were significantly oversold. Even if I wasn't expecting the Fed to raise rates, the USD was also extremely oversold and none of the issues of the financial system had been solved. The world was still short on dollars, what the Fed and the government did was too little and at the same time everyone printed. In the current environment, on the one hand bonds are in major downtrend and the USD is in a major uptrend, and on the other hand both might have reversed after hitting major inflection points. Hence it is probably better to either go with the trend or simply wait a bit until the market gives us a clearer picture as to where it wants to go next. Thanks a lot for reading and good luck with your trading! :)
FX:NAS100Education
by BitcoinMacro
10-Year Treasury Yield All Set for Summer 2019 Highs?Following another strong US CPI report, the 10-year Treasury yield surged above 2%, further pushing above peaks from late 2019 (1.9073 - 1.9718). That has exposed peaks from summer 2019 as key resistance (2.1779 - 2.1431). A bullish Golden Cross remains in play between the 20- and 50-day Simple Moving Averages. Keep a close eye on RSI, negative divergence shows fading upside momentum. A turn lower may see the SMAs act as support, maintaining the dominant upside focus. TVC:US10Y
TVC:US10Y
by QM_Dubrovsky
10 Year Bonds Short ? / EU Long !As you can hopefully see, there is a correlation between Euro Bunds and US Treasuries. Because the yields on bonds have risen sharply in the last few days, the question now arises as to how long this will last? Yields had their last strong increase due to excellent economic data of the 4th calendar week. It is therefore very possible that if deteriorated to very negative fundamental data are published in the near future, we will see an increase in Euro Bund yields and, on the other hand, weaker US bonds.
E
by Heinisch_2108
Bonds Test Lower LevelsBonds appeared to be making an effort to attempt higher levels, with a bull wedge pattern forming with an upper bound at 128'10. However, we broke down from this pattern, smashing through the 128 handle into the 127's and then some. The next level of support at 127'22 did little to provide support, though we finally bottomed out for now just above 127'08. Currently, we are seeing a brief pivot with an attempt to break 127'22 from below which is meeting resistance confirmed by two red triangles on the KRI. If we are able to break this level, the next target is 128'01. The Kovach OBV has flattened out suggesting we won't expect much in the way of momentum for now. If we fall further, 127'08 should provide support, then 127'01.
CBOT:ZN1!
by quantguy
Bargain hunters go shopping into tech and support US IndexesMorning Jumpstart Macro View and US market recap 31-01-22 US ended the week with a bang as bargain hunters went shopping to support the broader US market. Tech was again the favoured stocks which lifted the SP500 while the DOW lagged the enthusiasm. There may be some end of month window dressing on the cards also which may have provided some support. For a deeper look at the price action, key levels and what I see playing out...watch the video and feel free to leave any comments. View more at www.tradethestructure.com
CBOT:ZB1!
by TradeTheStructure
2
TNX - 10Yr Yields Sell Offers and Bond VX / Trouble Bond Bagholders just never learn - this Secular Cult is doomed to extinction. The two-year Treasury yield posted its biggest single-day jump since the market volatility of March 2020. Of course, this was after Federal Reserve Chair Jerome Powell promoted the Policy Flip Flop that the Fed will raise rates in March, and left the screen porch door open for a quicker than-anticipated pace of rate increases. The Dot Plot is wiggling in excitement. IN reality, the FED will begin to Temper expectations. It is what they do - Lie Cheat Steal / Delay. 10 Yr Yields have seen another fantastic ROC-driven Spike which advanced well ahead of the Pre-Spring Meltup in 2021. __________________________________________________________________ TNX will provide a very large indication as to how the preset Wedge on the ES/NQ resolve, likely this week... Keep it in purview at all times, sudden violent reactions are to be expected.
TVC:TNX
by HK_L61
Head and Shoulders Breakdown in BondsAfter breaking down from our head and shoulders pattern, bonds have found support at lower levels and have attempted a rebound. The level 127'08 provided good support confirmed by a green triangle on the KRI, and we saw a nice pivot there. We were able to break above 127'22, the next level above before retracing and stabilizing above 127'08 again. It appears that ZN is attempting to stabilize in this area, as we mentioned in the reports. The Kovach OBV has leveled off, so we anticipate the price action to be range bound between these levels.
CBOT:ZN1!
by quantguy
FX beacon- why AUD traders needs to focus on the US yield curve Lots of chatter in the market about the US yield curve headed ever closer towards inversion – clearly, much of this move has been driven by short-term rates which have seen 2yr Treasuries push to 1.19% (the highest since Feb 2020), with fed funds futures pricing close to 5 hikes through 2022. I have shown the US 2s v 10s spread, but US 5s v 30s is certainly getting smacked and at 43bp is probably the part of the curve that will invert first. So, if we know yield curves have been one of the best predictors of future economic stress and recessions, surely it makes sense that the AUD will co-vary with curve flattening? The AUD being a beacon of cyclicality and growth expectations. For fundamental traders, especially swing and certainly position traders, understanding what a currency pair is most sensitive to can help cultivate a short-term edge. If you know what to look at it can save you a ton of time, right? Well, we can look at Asian equity markets and see AUDUSD fairly well correlated here and we can take our pick of the Aussie yield curve over the US curve – however, in this exercise I see a solid relationship in play between the AUDUSD and US yield curve – it tells me if US long-end rates outperform and 10yr yields drop faster than short-term rates then the AUDUSD is headed below the 70-handle and the December swing low of 0.6993. For those trading the AUD, and who want to know why it's moving from A-B and what could cause it to go to C…the yield curve is your central guide right now.
TVC:US10YShort
by Pepperstone
1
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.
TVC:US30Y
by Joshuakm
doesnt look like risk off/conservative sentiment imho (us10y)bonds have been playing along with the aggressive selling in equities so far, but that looks as if it may be about to change for the near term. if risk off/conservative sentiment were really back in force for broader markets we would see government bond yield continuing to increase as the market drops. what the ten year has been telling me for the past week is that inflows are about to return to stocks for at least a short while. will we v shaped bounce back to all time highs? its almost certain we wont but, much to the chagrin of short sellers and cash hoarders, some sort of long play may be in the cards in the following week, and i imagine bonds could be up next in line at the barber.
TVC:US10YShort
by cerealtrades