US10Y
US10Y The 1D MA50 is the key. So far rejected.The U.S. Government Bonds 10YR Yield (US10Y) has gone a long way since our top prediction two months ago and the update 5 days ago (4H time-frame):
Now back to the 1D time-frame, the price has started rising since the December 07 Low, exactly at the bottom (Higher Lows trend-line) of the long-term Channel Up, around the 1D MA100 (green trend-line). So far this is quite similar to the early August rise. The 1D RSI has hit the 1 year Support Zone twice, again as in the last (August 02) Higher Low.
In order to extend selling the US10Y, we ideally need to see the 1D MA200 (orange trend-line) break, which is holding as Support since December 29 2021, and in that case we will target initially the 2.510% (August 02 Low) Support and then the 1W MA100 (red trend-line).
A closing above the 1D MA50 (blue trend-line) though, should restore the long-term bullish trend and will be our buy break-out signal to enter and target the 4.340% (October 21 High) Resistance. So far the 1D MA50 seems to get rejected.
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OECD Leading Indicator vs. Market Cycles - Updated 122022 Today's post is inspired by the work of @CMT_Association here on @TradingView, and is designed to give some insight into financial market vs. business cycle timing:
We will be comparing various assets to the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (USALOLITONOSTSAM) for the 🇺🇸.
Keep in mind that readings above 100 (green dotted line) suggest economic expansion to come while readings below 100 suggests broader economic weakness, and likely economic recession based on history.
Given the the index is currently trading below 100 , and possibly continuing to fall — what does this mean for the economic outlook going forward, specifically as it compares to S&P 500 (SPY ES1! SPX), DXY (U.S. Dollar), Federal Reserve Fed Funds Rate (FEDFUNDS), 2/10 Yield Curve Inversion (US02Y US10Y), U.S. Inflation Rate YoY (USIRYY), U.S. Unemployment Rate (UNRATE), Crude Oil (CL1! USOIL), Lumber Futures (LBS1!), Gold (GOLD), Silver (SILVER), U.S. Mortgage Rates (USALOLITONOSTSAM), and possible timing of the financial market(s) recovery?
Let's have a look at some of the charts as they highlight that real economic weakness is likely into H1/23', paired with the potential beginning of a financial asset recovery as the business cycle works through its bottoming process.
Chart Key for Composite Leading Indicator (USALOLITONOSTSAM): 📊🗝
Green Dotted Line (Horizontal): >100 = Economic Expansion
Orange Dotted Line (Horizontal): Current Reading
Red Dotted Line (Horizontal): Historic Danger Zone
Black Dashed Lines (Vertical): Pre-Recession OECD Leading Indicator Peak
If you want a copy of this chart, here is the link to make a copy: 📊👇🏼
www.tradingview.com
S&P 500 SPX 1991-Present (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
S&P 500 SPX 2006-2017 (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
S&P 500 SPX 2016-Present (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Dollar DXY (Black Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
US02Y Treasury (Black Link) vs. Federal Reserve Fed Funds Rate FEDFUNDS (Blue Line) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
US02Y/US10Y Yield Curve Inversion (Baseline >0%, <0% Curve Inverted = Trouble in Markets) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Inflation Rate YoY (USIRYY) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Unemployment Rate (UNRATE) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Crude Oil USOIL CL1! (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Lumber LBS1! (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
GOLD (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
SILVER (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
U.S. Mortgage Rates (Black Link) vs. OECD Composite Leading Indicator (USALOLITONOSTSAM):
Here is the updated release schedule for the OECD Composite Leading Indicator (USALOLITONOSTSAM) for 2023: 🗓
data.oecd.org
Learn more about the OECD Composite Leading Indicator (USALOLITONOSTSAM) using the link below: 💡
data.oecd.org
What is your takeaway(s) from these charts? 👇🏼
GOLD SHORT TO 1760Self explanatory as all the analysis is on the chart. But market has grabbed liquidity by taking out 1810 highs and peaking at 1822. Since then Gold has crashed back down below 1778, taking out the last low and changing the market structure which now indicates a sell.
Gold is currently sitting at a resistance zone , which I am looking to short from. However, it is possible since its the end of the week, that market might move a little higher towards 1798-1802 for further liquidity at the start of next week before deciding to melt. Let's see how this move plays out! Drop a follow to keep up with the latest updates.
GOLD SHORT TO 1570📉Self explanatory as all the analysis is on the chart. But market has grabbed liquidity by taking out 1810 highs and peaking at 1822. Since then Gold has crashed back down below 1778, taking out the last low and changing the market structure which now indicates a sell.
Gold is currently sitting at a resistance zone, which I am looking to short from. However, it is possible since its the end of the week, that market might move a little higher towards 1798-1802 for further liquidity at the start of next week before deciding to melt. Let's see how this move plays out! Drop a follow to keep up with the latest updates.
US10Y Critical point, break or hold on the Channel bottom!The U.S. Government Bonds 10YR Yield ( US10Y ) has gone a long way since our top prediction two months ago and the update 20 days ago (4H time-frame):
Now back to the 1D time-frame, the price is exactly at the bottom (Higher Lows trend-line) of the long-term Channel Up, below the 1D MA100 (green trend-line), which is where the last bottom was priced. The 1D RSI has hit the 1 year Support Zone twice, again as in the last (August 02) Higher Low and it remains to be seen if the price reacts with a bounce. So far the move is much weaker than in August.
In order to extend our selling we ideally need to see the 1D MA200 (orange trend-line) break, which is holding as Support since December 29 2021, and in that case we will target initially the 2.510% (August 02 Low) Support and then the 1W MA100 (red trend-line).
A closing above the 1D MA50 (blue trend-line) though, should restore the long-term bullish trend and will be our buy break-out signal to enter and target the 4.340% (OCtober 21 High) Resistance.
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Does the yield curve inversion signal recession?The famous negative curve.
This market concept is used when the US02Y or US03Y operate at higher levels than the US10Y, this behavior usually anticipates recessions, but why does this happen?
The inversion of the yield curve distorts the expected functionality of the financial system.
Under "normal" conditions, raising funds in the short term for investment in longer terms is used to provide positive arbitrage between interest rates on liabilities (paid) and assets (received), a strategy subject to the limits of the rollover capacity of the liabilities and raising new funds.
The availability of assets with higher premiums and liquidity, US02Y and US03Y, makes it less attractive to offer funds for longer terms < US10Y, and more expensive to raise funds for those who demand funds for shorter terms.
So the interest curve is considered a kind of thermometer of what lies ahead in an economy, and it is the graphic representation of how much investors are charging to lend money in different maturities, and once it is inverted, it means that it is more expensive to borrow in the short term than in the long term – an unusual thing, because more distant payment dates mean greater risks for the borrower.
In the US economy, a widely documented fact is that yield curve inversion (i.e., when there is a negative differential between long-term versus short-term bond yields) is a good leading indicator of periods of economic contraction. four to six quarters ahead.
According to data available on the Federal Reserve website, yield curve inversion has preceded every US recession since 1950, with the exception of a false signal in 1967.
There is also evidence that indicators of this nature are important predictors of periods of economic contraction in other countries.
But are there any silver linings to this unusual reversal scenario? Yes, in these moments of greater uncertainty we have an interesting opportunity to buy good companies at low prices.
This is because after the monetary tightening cycle, the economy usually weakens, during this period risk assets suffer, considering that their future projections will suffer due to the scenario, so many of the market participants seek security in bonds, others seek to anticipate the recovery considering that as soon as this CORRECTIVE cycle ends, a new UPWARD CYCLE tends to maintain perennial companies and give birth to many new companies that arise in the face of challenging scenarios.
US10Y Time for it to decide the long term trendThe US10Y is approaching the Higher Lows support of the 2022 bullish trend. Holding it can make the price rebound back to the 1D MA50 (blue line) and the dashed line of its growth zone at least.
A break below it and in particular the 1D MA200 (orange line) can turn the trend bearish long term to the 1W MA100 (red line).
The 1D RSI is on its (oversold) Support level as well.
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How VIX follows SPXVIX is a measure of volatility. It takes the last 30 days of SPX, and measures it's variance.
I would guess that VVIX does the exact same thing to VIX, it takes the recent 30 days of VIX, and measures it's variance.
These two, along with SKEW are some of the methods investors calculate risk. I don't have the technical/financial knowledge on the ways investors can use risk management for better financial decisions.
If we do some "magic" we can transform these notoriously unchartable indices.
I am aware that since VIX takes the value of SPX, gets affected by both the volatility and the price of SPX. So technically from it's nature VIX tracks SPX.
If, for example, we plot the chart (1-VIX) we will see the following:
As we already know, he inverse of VIX follows SPX. Low volatility equals high SPX.
The calculation logic of the chart is: Scale down VVIX such that it is in a similar scale to VIX. Then subtract one from the other.
SPX is scaled down, after we divide it by M2SL.
I would guess that from 2009 to 2019, the growth was sustained because VIX was consistently low.
I also noticed that VVIX this year is incredibly low. One would expect that with such this year's recession that VVIX would also pick up the pace. During periods of very high volatility like the Great Recession, VVIX tracks VIX. Not this year however...
As a fellow trader pointed out quite some time ago:
Now VIX is higher and it's behavior with VVIX is very similar to 2008. We could say that the current situation is much similar to 2000 or with 1970s with stagflation and not 2008. Some things however, they smell foul. The elephant in the room maybe...
SKEW is in an all-time low. This could encourage investors to over-expose. THAT is when crashes happen. Overexposing when liquidity is being dried up from the FED, is a recipe for disaster. Even if we grow from here and everyone wins, who will have the money to pay back all these winnings? Especially now, with everyone investing like crazy, over-leveraging and such. And if EVERYONE is buying, who is selling? "Buying the dip" is part of the equation...
I believe that the bottom is NOT in yet. And since charting indirect stuff like VIX, like housing, yields, energy, all point to the same direction, I cannot ignore them.
PS. The elephant is the collapsed worldwide-production-chain. The elephant is that we are one step away from war or famine. And maybe, just maybe, the elephant is long gone... we just don't know it yet.
And we are talking about how the DOW will not fall. We are convinced that we are in the bottom and we are buying the dip. We are dreaming of more money quicker.
Tread lightly, for this is hallowed ground.
-Father Grigori
I am not a trader, I am a father of a cat named Alyx. Don't take what I say as trading advice.
US10Y Bounce at 3.332% then to 5.376 by Summer 2023The current pitchfork trend is holding and I'm looking at the US10Y reverse at 3.332% this month. I'm also expecting the fed to over tighten or some other news event to drive the US10Y to 5.376% by June 2023. The nature of pitchforks are able to easily visualize the physics of the market and I'll do my best below to explain what I'm seeing.
From a price action perspective the US10Y broke the median from the beginning of time and is coming back to re-test it as support.
As of August 2011 gap down to Jan 2014 price action has respected that median range through today.
In the world of physics, when you have a huge swing away from the median, you'll also have the same energy swinging back in the other direction. Think of a swinging palm tree in the wind.
The same is happening here and is illustrated by capturing the breakdown in Feb 2020 where price quickly broke trend then held the 3 standard deviant move down during the 2020 crash. US10Y has quickly made a move in the other direction and is preparing to breakout with huge force.
Follow the DOW for clues....The DOW is the leader right now...and the saying "Don't fight the Fed" is still very much applicable. There is no pivot, inflationary pressures still exist and the 2022 moves in the US 10 year should not be taken lightly.
If you read over my last post (Nov 15th) you know we are following a path similar to the Dot com bust bear market except this time it will be labeled as the Bond bust.
DJI (DOW) continues to follow the 2000-2002 path of SMA's flattening out over time while SPX, RUT & NDX lag behind DJI. Obviously, no two bear markets are exactly the same but they can follow similar patterns.
In the 2000-2002 bear market you can see the 2 year battle between the bulls/bears wore them both out; just like we have seen over the past year. The 9 SMA or Tenkan Sen has crossed below the 15 & 30 SMA's just like they did during the dot com bust...we then proceeded to re-test the ATH after the crossing of these SMA's before more rejection. I warned in my last post the DJI would probably reach the 35,000 "ish" range and I still believe we will hit this area...I mean Santa is coming to town right? The areas of resistance for DJI are now 35,492.22; 35,824.28 & 36,952.65...I will begin to ladder into the sell side when we get above 35,000.
US 10 Year on a 6 month timeframe-This chart should scare the you know what out of any company or person with revolving credit! The continued hiking of interest rates is not "transitory".
Commodity Index-Inflationary pressures still exist in case you thought we've reached "peak inflation"....the weekly is one scary looking bull flag. Just takes another "event" and watch out.
US10Y - 10Y Bonds: And Reverse Forest RuuunLet's see:
This was the chart I posted this year:
We reached the U-MLH.
This is the stretch to the upside. How ever, it could go further towards the Moon.
But usually, if price get rejected at the MLH's, we see the opposite move. In this case to the downside, to the Centerline.
This is a great opportunity, the second time this year in the 10Y Bonds, which I clearly will not miss.
Additionally this would indicate a bounce in the index markets (S&P500, Nasdaq etc.).And if you pay attention to my S&P Chart, then you know that the Centerline is reached too there.
So prepare for a possible bounce, even it's just temporarily.
US10Y Still bearish at least on the short-termThe U.S. Government Bonds 10YR Yield (US10Y) has gone a long way since our top prediction a month ago:
As you see, the Lower Highs 1D RSI Bearish Divergence, accurately projected the top and the price broke much lower than the 1D MA50. On a short-term horizon, as long as it fails to close above the 4H MA50 (blue trend-line), we will be targeting the 1D MA100 (green trend-line). Only a break above the 4H MA200 (orange trend-line) can restore the bullish trend, towards the 4.330 High as it happened on June 01 2022. On the other hand a closing below the 1D MA200 (yellow trend-line) would confirm the long-term trend switch from bullish to bearish.
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XAUUSD : HODL YOUR POSITIONS ?As mentioned yesterday, Gold made first test of the former 1,735 - 1,729.50 Resistance Zone as Support and from today's green candle, looks like it will respect the symmetry and rebound.
Unless we break above the 1D MA200 (1,801.06), this rebound will be short-lived and won't be able to sustain a long-term bullish trend.
The 1D time-frame remains bullish (RSI # 59.556, MACD # 23.430, ADX # 30.251) so short-term traders can continue buying the dips but look to take profit quickly at max 20 points, until the 1D MA200 breaks.
The 1D MA50 is at 1,682.24 and remains the ultimate Support of this November uptrend.
If broken the bearish trend will be resumed targeting 1,630 initially.
The US10Y remains below its 1D MA50 and is what keeps Gold bullish today but a potential rise of the DXY to retest the 1D MA50 as Resistance can extend this pull-back on Gold.
Plan your trades accordingly and keep in mind that tomorrow is the big news (FOMC Meeting Minutes).
All prices mentioned on my analysis are on XAUUSD.
XAUUSD : HOLD YOUR POSITIONSAs mentioned yesterday, Gold made first test of the former 1,735 - 1,729.50 Resistance Zone as Support and from today's green candle, looks like it will respect the symmetry and rebound.
Unless we break above the 1D MA200 (1,801.06), this rebound will be short-lived and won't be able to sustain a long-term bullish trend.
The 1D time-frame remains bullish (RSI # 59.556, MACD # 23.430, ADX # 30.251) so short-term traders can continue buying the dips but look to take profit quickly at max 20 points, until the 1D MA200 breaks.
The 1D MA50 is at 1,682.24 and remains the ultimate Support of this November uptrend.
If broken the bearish trend will be resumed targeting 1,630 initially.
The US10Y remains below its 1D MA50 and is what keeps Gold bullish today but a potential rise of the DXY to retest the 1D MA50 as Resistance can extend this pull-back on Gold.
Plan your trades accordingly and keep in mind that tomorrow is the big news (FOMC Meeting Minutes).
All prices mentioned on my analysis are on XAUUSD.
Go long stocks short 10y bond yieldLook at where the 10y yield is currently trading - its right above its 200 period moving average at major resistance. This is yet another indicator to me that stocks have bottomed and inflation will start to fall away this year. Bond yields should fall away again as we move through the year.
I bought heavily into stocks last week, amazon at $2050, Netflix at $170, Meta at $189, Snap at $22 plus so many others. This bond chart really shows me that things are due for a major reverse now and if you caught my dollar (DXY) short post on Friday you are already massively in profit in that short too. There are so many great opportunities now to add to stocks on dips and keep shorting the dollar (provided we see a nice steady drop in CPI figures each month for the rest of the year).
USDJPY falling, because of Treasury buying?Private foreigners have purchased just over half a trillion - yes, Trillion - LT USTs in the past six months (sorry, no #brettonwoods3)
Why such huge demand for safe, liquid US$ instruments? Not a whole lot of trust for the Fed's toolkit and use. © Jeff Snider
What is the reaction to buying UST's? The yields come lower. Interest rates come lower.
What does the Fed do? Follows the markets.
We're seeing a drop off in the US 10 Year Yield and this is also part of a wider yield curve inversion in the eurodollar market. Inversions signal troubles ahead, so anyone with money goes to the safest assets. Namely sovereign bonds and ultimately US sovereign debt.
The USDJPY has been tracking the move of US10Y and also either accelerated or decelerated depending on whats going on in the oil markets.
Japan is heavily dependent on importing energy, so a higher Oil price means the Japanese economy gets crushed and the yen drops. Oil prices are coming lower at present.
US10Y Is more selling pressure ahead?The U.S. Government Bonds 10 YR Yield (US10Y) confirmed our huge Bearish Divergence spotted on our October 25 analysis and started the first pull-back since July:
The price is now below the 1D MA50 (blue trend-line) for the first time since August 19 and today is testing it as a Resistance. A double candle close above the 1D MA50, restores the bullish trend towards the October 21 High. Failure to establish two 1D candle closings above it, should most likely extend the selling pressure towards the 1D MA100 (green trend-line), which was where the pull-backs of March 07 and November 09 2021 found Support. A closing below it targets the final long-term Support of 1D MA200 (orange trend-line).
As you see on the chart, that still wouldn't change the long-term bullish trend on the US10Y as it would hit the bottom (Higher Lows trend-line) of the Channel Up (green). On the other hand a closing below the 1D MA200, would constitute a long-term trend change to bearish and target first the 1W MA100 (red trend-line).
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GOLD and Bond Yields. Are they starting to close the gap?Many may wonder what is the main driving force behind Gold's recent rally and a first answer would be the strong fall on the Dollar Index, since Gold is valued in USD. This is true but the basic driver leading Gold higher are the Bond Yields, with Bonds being an asset that is in direct competition with Gold, in the same safe haven category that at times is considered more attractive due to offering yields.
Bond yields shown in blue on this weekly chart have been rising non-stop since August 2020, which was Gold's technical market peak (excluding the most recent March 2020 which was fundamentally fueled by the Ukraine/ Russi war). Gold's November rise has been the strongest since that time as it is further assisted by the big drop on the US Dollar Index. This isn't yet a confirmed bearish reversal for the bond yields (US10Y) but is close to do so.
As you see historically, especially since 2012 (after Gold's previous cyclical top), we had periods that the gap between Gold and yields widened but was always closed. These two negatively correlated assets have diverged by a wide margin since August and it is highly likely that the recent Gold rally/ Yield pullback is the start of their convergence again.
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2022-???? Bear Market to be labeled as: Bond Bust!Recession, Stagflation, Inflation, Dollar Strength, Russia/Ukraine War...how about labeling the current market turmoil what it really is; A Bond Bust!
As you can see from the monthly chart below, in Jan 2022 the US10YR Yield bullishly broke the neckline of an inverse H&S that formed between June 2019-Jan 2022; then in March of 2022 it broke up again from major downtrend line. (I wrote a post about this in March 2022 saying we were in "Unchartered Territory" and the US10YR must be watched).
If the Inverse H&S plays out it means we will see interest rates in the 7.5-8% range at a minimum in the near term. (Two things worth noting: 1. Nothing about this chart is bearish nor can you say it is showing any signs of reversing anytime soon when looking at it from a long term perspective. 2. Based upon charting theory-H&S patterns usually play out IF they are formed at tops or bottoms)
Most people think of bonds as a "relatively safe" investment vs. other types of investments so when you have the below loss on a "relatively safe" investment it should send out shock waves:
2022 YTD TLT LOSS: -34.12%
TLT High to Low during current bear market (Years 2000-2022): -48.89%
A 20 year US Bond ETF losing almost 50% within 31 months should be shocking AND, as stated above, yields are not showing any signs of reversing!
Here are the YTD Losses, as of Friday, in the US Indexes.
NDX: -30.08%
RUT: -19.29%
SPX: -19.04%
DJI: -10.99%
Would you have ever thought that TLT would outperform NDX in YTD losses during a bear market? Before 2022, I think 99.9% of traders would state this would be impossible. And yet...here we are with only two months left in 2022.
Now to the monthly charts of the DOW/DJI. I wanted to have a look at this chart since it has held up relatively well to see how the current monthly chart compares to other bear markets (Defined as a greater than 20% decline close to close). The green line on the charts is the 15 SMA...I also added some horizontal highs/lows based upon the high/lows of the last time price made an ATH and then closed below the 15 SMA and then back above it BEFORE a bear market formed. No two bear markets are the same so it's really about the relationship of the 15 SMA and the horizontal pink & red lines...what this analysis tells me is we will most likely test the March 2020 low at some point in time...we might come back up and re-test the ATH or go a little above it but statistically speaking if you look at the bear markets of the last 100 years in the DOW a new bull market is not us! Oct 2022 could however provide a temporary low! (Exceptions: 1917 & 1987 bear markets)
Key take aways:
1. The US10YR Yield; followed by the other common known Treasury Yields, should be the most discussed topic and how those charts affect money flows into different types of investments instead of all the other FUD out there! Remember: Money chases yields.
2. The chances of us re-visiting the Covid lows in the DOW are high given the above analysis.
3. NDX doesn't like high Treasury Yields as it's currently the weakest of the US Indexes and very weak compared to the DOW. Its history isn't as vast as the DOW so its anyone's guess as to how low it could go or how long it could take to make another ATH. It's not an Index I'm looking at buying anytime soon as Yields have made a clear signal that the 40 year downtrend has ended so we need to change our thinking in this new environment!
4. January seems to be a topping month while October seems to be a bottoming month however that is probably just a coincidence as this was not the case in the early 1900's.
There is a lot to take in above so I hope it makes sense after you think through it...I know it's not a quick read!