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MM29(b) - Existing Home Sales Versus New Home Sales U.S. Existing Home Sales & New Home Sales Comparing the Charts When you look at both charts and compare them you can see that between June 2022 and Sept 2023 the decreasing EXISTING home sales negatively correlated with the increase in NEW home sales. This would make surface level sense given the lack of existing homes being available creating a need for new housing. In recent months there has been a sharp divergence in the opposite direction, particularly in NEW home sales, which plunged from 717k in Sept 2023 to 590k in Nov 2023. EXISTING Home Sales increased marginally from 3.79m in Oct 2023 to 3.82m in Nov 2023. Is this a turning point? Obviously a combination of factors are at work here and its not just existing supply coming to the market that might be disrupting new home sales or vice versa but its interesting seeing this correlation and its something to keep an eye on for investors and policy makers. Sale of brand new homes creates a lot of economic activity and if sales are declining significantly whilst existing homes are starting to come back onto the market, one would presume it would stress the housing market and the economy. We may need reduced interest rates sooner rather than later to help fan the flames of the new housing market, or maybe its time the market takes a breather? What do you think? It certainly adds to the argument for lower rates sooner from the Federal Reserve to "soften the landing" or that divergence noted today. Each Chart is covered separately in todays Macro Monday PUKA
FRED:EXHOSLUSM495S
by PukaCharts
Macro Monday 29 - U.S. Existing Home Sales & New Home Sales U.S. Existing Home Sales & New Home Sales U.S. Existing Home Sales U.S. Existing Home Sales data helps us to gauge the strength of the U.S. housing market and is a key indicator of overall economic health in the U.S. In simple terms U.S. Existing Home Sales is a seasonally adjusted record of previously owned homes that have been sold in the United States (per unit). The monthly data report is released by the National Association of Realtors (NAR) and It is a lagging indicator since people often make housing choices in response to a changes in interest rates (which would lead ahead of this dataset). Decembers report will be released this Friday 19th Jan. I will update the chart then so we can see how the trend is developing. The Chart You can clearly see that we have been in a downtrend since October 2020 where we topped out at 6.73m units. Thereafter from Jan 2022 – October 2023 we fell precipitously from 6.34m down to 3.79m. Sales of previously owned homes in the U.S. went up 0.8% month-over-month to a seasonally adjusted annualized rate of 3.82m units in November 2023 (a turning point?), rising for the first time in five months, and rebounding from 3.79m in October which was the lowest level since August 2010. Whilst we are waiting for December 2023 figures, the Jan – Mar 2024 figures will also provide a good sentiment gauge for the direction in 2024. The chart has that look at present that it is basing here or potentially changing trend. Accessibility to existing homes is clearly low at present and one would think that low existing home sales clogs up the market and liquidity that might flow with it and the economy however, the low existing house sales also appears to create demand for New Homes which we will cover next. U.S. New Home Sales New Home Sales, also known as "new residential sales," is an economic indicator that measures sales of newly built homes (seasonally adjusted for annualized figures). The New Home Sales measure compiles data through interviews with home-builders and analysis of the U.S. Census Bureau's Survey of Construction. Specifically, it utilizes information on building permits issued for new construction projects. A home is considered part of the measure if a deposit was paid for its purchase or if a contract to purchase was signed within or after the year of its construction. The construction of new homes contributes significantly to the Gross Domestic Product (GDP) of the U.S. It involves spending on materials, labor, and various services, which can stimulate economic activity. New home sales data is a critical metric for assessing economic health, understanding employment trends, and gaining insights into the dynamics of the housing market. The Chart You can clearly see that we never really recovered after the 2005 peak of 1.39m units, however bottomed in 2011 and started making a slow climb from 273k to a 1.04m peak in August 2020. This remains the recent peak and has not been recovered. An almost 50% reduction in New Home Sales followed reducing from 1.04m to 543k units over 23 months ending July 2022. We are currently 10% above this level at 590k (for Nov) having rolled over in July 2023 from 728k. The chart looks very concerning. Should we lose the diagonal and horizontal support with this month or next months data release, it could be very telling of a struggling new housing market. We have tested the horizontal support three times and you would hope that this would hold. Time will tell. Comparing the Charts Here is where it gets a little interesting. When you look at both charts and compare them you can see that between June 2022 and Sept 2023 the decreasing EXISTING home sales negatively correlated with the increase in NEW home sales. This would make surface level sense given the lack of existing homes being available creating a need for new housing. In recent months there has been a sharp divergence in the opposite direction, particularly in NEW home sales, which plunged from 717k in Sept 2023 to 590k in Nov 2023. EXISTING Home Sales increased marginally from 3.79m in Oct 2023 to 3.82m in Nov 2023. Is this a turning point? Obviously a combination of factors are at work here and its not just existing supply coming to the market that might be disrupting new home sales or vice versa but its interesting seeing this correlation and its something to keep an eye on for investors and policy makers. Sale of brand new homes creates a lot of economic activity and if sales are declining significantly whilst existing homes are starting to come back onto the market, one would presume it would stress the housing market and the economy. We may need reduced interest rates sooner rather than later to help fan the flames of the new housing market, or maybe its time the market takes a breather? What do you think? It certainly adds to the argument for lower rates sooner from the Federal Reserve to "soften the landing" or that divergence noted today. On Macro Monday 21 we covered the NAHB Housing Market Index and its close correlation to U.S Housing Starts. If you enjoyed this read today, you should take a look at that. They are two useful additions that give another view. I'll throw the link in the comments. Thanks for coming along again 🤓 if you enjoyed this or found it informative please let me know PUKA
FRED:EXHOSLUSM495S
by PukaCharts
SOLOS-CHART2013(KAFKA)1. Lines representing the money supply metrics for the United States (US M2 - blue line) and the central banks for Japan (JP M2 - purple line) and the European Union (EU M2 - dotted purple line), charted against the left vertical axis as percentages. The money supply data shows a significant increase over time, especially notable during the time period that aligns with the COVID-19 pandemic where expansionary monetary policies were common. 2. A comparison of currency pair exchange rates, charted against the right vertical axis in terms of index values: EUR/JPY (red line), JPM2/EUM2 (green line), and USD/JPY (orange line). These pairs reflect the value of the euro and the U.S. dollar against the Japanese yen, and the ratio between the Japanese and European money supply measures.
ECONOMICS:USM2
by Kafka_BoardGame
Latest Solos-Chart(KAFKA)1. Lines representing the money supply metrics for the United States (US M2 - blue line) and the central banks for Japan (JP M2 - purple line) and the European Union (EU M2 - dotted purple line), charted against the left vertical axis as percentages. The money supply data shows a significant increase over time, especially notable during the time period that aligns with the COVID-19 pandemic where expansionary monetary policies were common. 2. A comparison of currency pair exchange rates, charted against the right vertical axis in terms of index values: EUR/JPY (red line), JPM2/EUM2 (green line), and USD/JPY (orange line). These pairs reflect the value of the euro and the U.S. dollar against the Japanese yen, and the ratio between the Japanese and European money supply measures.
ECONOMICS:USM2
by Kafka_BoardGame
1
Core and Headline Producer Price Index (PPI) Release Core and Headline PPI (Dec 2023 figures) U.S. Headline PPI Prev: 0.8% / Exp: 1.3% Rep: 1.0% ✅ Lower than expected ✅ U.S. Core PPI (excludes food and energy) Prev: 2.0% / Exp: 1.9% Rep: 1.8% ✅ Lower Than Expected✅ What is PPI and why is it important? Producer Price Index is a crucial economic indicator that provides valuable information about inflationary pressures at the producer level. By tracking changes in producer prices over time, it provides insights into inflation trends before they manifest in consumer prices. Difference between Core and Headline PPI The Core PPI aims to provide a more stable measure of underlying inflation, while the headline index reflects all price changes, including those driven by more volatile components such as food an energy. You can see from the chart that Headline PPI in red is the swings more widely up and down due to the inclusion of these volatile components (food and energy). ✅ LOWER THAN EXPECTED PPI TODAY✅ Core and Headline PPI came in lower than expected this month and as you can see we are reaching down into the historically more moderate zone between 3% and -1.5%. This bodes will for inflationary pressures in general and may be an early indicator of lower Core and Headline inflation figures (for CPI) in the coming months. PUKA
ECONOMICS:USCPPYY
by PukaCharts
Macro Monday 9~ Initial Jobless Claims MACRO MONDAY 9 Initial Jobless Claims Historical Analysis and Important upcoming levels Initial claims are new jobless claims filed by U.S. workers seeking unemployment compensation, included in the unemployment insurance weekly claims report. "Initial claims" refers to the government report on the number of workers applying for unemployment benefits for the first time following job loss First-time jobless claims can be a useful leading indicator because elevated numbers tend to lead to further economic weakness, and to decline ahead of a recovery Initial claims show the recent layoffs trend and does not a full picture of the labor market however it can provide more frequent data points indicating the trend in layoffs based on the recent decisions of U.S. employers. The layoffs trend can be particularly telling at economic turning points. With that in mind lets look at the chart and its historic patterns. The Chart The chart looks complicated but is incredibly simple and can be summarised as follows. - Recessions are in red - Increases to Initial Jobless Claims prior to recessions are in blue - It is clear that prior to recessions Jobless Claims typically increase but for how long and by what amount? - The min/max increase in claims prior to recession is between 35k - 127k - The min/max timeframe of increasing claims prior to recession is 7 - 23 months - The average of the above is a 71k claims increase over a 14 month period. - At present we are below that average at 49k increase over 11 months @ 230,000 claims. - I have set out levels on the chart for us to monitor going forward in line with the min and max claims amounts and timelines as above. We can monitor these levels on trading view going forward just by pressing play and seeing if we are nearing or hitting the indicative levels. - Once we reach the average increase amount at 252k or the average timeline of 14 months in Nov 2023, we are entering into higher risk recession territory. Currently, the max increase in claims prior to recession is projected to be at the level of 308,000 (based on historic claims) and the max timeframe is out to Aug 2024 (based on historic timeframes) thus indicating that between Nov 2023 and Aug 2024, subject to continued increasing initial claims (above the average level of 252,000) it is probable that there will be a recession within this time window (Not guaranteed). If initial claims fall below their recent low of 200,000 I believe this might invalidate the possibility of a recession or at least have a significant lagging effect on time horizon. At present this outcome seems unlikely but anything is possible and we can monitor this on an ongoing basis. The current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to all of the above recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2). September will be the 6th month of that 6 – 22 month window and thus we are closing in on dangerous territory very fast. From reviewing initial jobless claims we can see how from Nov 2023 we are stepping into a higher risk zone on this chart also (subject to continued higher increases in claims). Should we have claims higher than the average of 252,000 we will be confirming another step towards a higher risk of a recession. Factoring in yield curve inversion and the initial jobless claims we could consider the months of Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (Jobless claims average timeframe hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward could be considered a higher Risk level 3. Adding to the above concerns is that M2 Money supply is still reducing (Macro Monday 8) and Global Net Liquidity is continuing to reduce (Macro Monday 4) as the S&P 500 is hitting a major resistance zone when accounting for M2 money supply (Macro Monday 8). At present it is clear that liquidity is reducing both globally and in the US. Currently fiscal stimulus appears to be filling the gaps and may be causing additional lagging effects to the changes we have seen imposed by Federal Reserve (balance sheet reduction and increased interest rates). Keep in mind that the Fed is also targeting higher unemployment to help quell the effects of inflation thus adding to the relevance of the Initial Jobless Claims numbers. Continued jobless claims are another metric that is not covered here today. Continued Jobless Claims accounts for the continuation of claims over a time period, thus indicating that those workers who made the first “Initial claims” have remained unemployed thereafter and have not managed to get new work. We might cover this in a future Macro Monday. Let me know if you want it sooner than later? We need all the help we can find in managing risk going forward and I hope all these charts can help you with that. We can monitor all these charts on my trading view just by pressing play and seeing where things are going. Regardless ill be providing updates along the way. Be safe out there PUKA
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ECONOMICS:USIJC
by PukaCharts
37
MACRO MONDAY 11~ Cont. Jobless Claims MACRO MONDAY 11 Continued Jobless Claims ECONOMICS:USCJC Continued Jobless Claims are the continued unemployment benefits claimed by workers who made their first “Initial claim” and remained unemployed in the weeks that followed. In other words, Initial Jobless Claims account for only the people that claimed their first week of unemployment benefit whilst Continued Jobless Claims accounts for people who continued to seek their unemployment benefit into week 2 and subsequent weeks. In order to be classified as a continuing claim, an unemployed individual must be unemployed for at least one week after filing an initial claim. They will be removed from the metric when they return to work. Whilst continuous claims do provide an aggregate of accumulating unemployment numbers over time, initial claims are reported sooner and considered more important to financial markets. Regardless there is a clear historic pattern on the Continued Claims Chart that demonstrates that continued jobless claims increase prior to recessions, and at present we are reaching higher than historical averages that have preceded recessions. The Chart The chart can be summarized as follows: - Recessions are in red - Increases in Continuous Jobless Claims prior to recessions are in blue - It is clear that prior to recessions Continuous Jobless Claims typically increase but for how long and by what amount? - The min/max increase in claims prior to recession is between 218k - 614k - The min/max timeframe of increasing claims prior to recession is 6 – 21 months - The average of the above is a 424k claim increase over a 11 month period. - At present we are now at the avg. 11 months time period and sit at an increase of 380k, however we exceeded 520k in continuous claims increases in Apr 2023. This obviously means since April 2023 continuous claims have reduced however the reduction is marginal against the larger move. - I have set out levels on the chart for us to monitor going forward in line with the min and max claims amounts and timelines as above. We can monitor these levels on trading view going forward just by pressing play and seeing if we are nearing or hitting the indicative levels. - If we reach the average increase amount at >424k AGAIN we are entering into higher risk of recession territory. We are already in month 11 of increases to continuous claims which is the average timeframe prior to a recession commencing. To be exact it is approx. 11.5 months therefore the 2ndhalf of the month of September is where we step into a higher risk level. Currently, the max increase in claims prior to recession is projected to be at a level of 1.928 million (based on historic claims) and the max timeframe is out to Jun 2024 (based on historic timeframes) thus indicating that between Aug 2023 and Jun 2024, subject to ongoing increasing continuous claims (holding above the average level of 1.734 million) it is probable that there will be a recession within this 11 month time window (Not guaranteed). If continuous claims fall below their minimum historic pre-recession level of 1.51 million I believe this might invalidate the possibility of a recession or at least have a significant lagging effect on time horizon. At present this outcome seems unlikely but anything is possible and we can monitor this on an ongoing basis. We now have a number of charts demonstrating that from Sept 2023 to Mar/Apr 2024 we have a significantly increased probability of recession. These charts were shared just a few days ago if want to have a look. These charts are as follows: 1. The current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to all of the recessions outlined on the below chart however it provided us with a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level. Sept 2023 is the 6th month of that 6 – 22 month window. The 22nd month is Jan 2025. The average time before a recession after the yield curve starts to turn up is 13 months or April 2024. - Based on this chart it is clear that there is substantially increased recession risk between Sept 2023 – April 2024. 2. Interest Rate Hike & S&P500 chart (Macro Monday 8). In the event that the Federal Reserve is pausing rates from Sept 2023, historic timelines of major hike cycles suggest a 7 month pause like in 2000 or a 16 month pause in line with 2007 (an avg. of both is c.11 months). For reference COVID-19’s rate pause was for 6 months. - 6 months from now would be March 2024 and 16 months from now would be Nov 2024. The average of both Jun 2024. - Based on this chart it is clear again that there is substantially increased recession risk between Sept 2023 – March 2024 of recession, increasing again thereafter from May onwards. 3. Initial Jobless Claims are currently increasing and are reaching pre-recessionary levels. If initial jobless claims surpasses its historic pre-recession averages of 252,000 of increased claims and if claims continue to increase past Nov 2023, this suggests we are entering into a much higher risk of recession. - Whilst this chart is not indicating the Sept 2023 to Mar/Apr 2024 time window as the two charts above are, it may present a date within that window of time from Nov 2023 forward (subject to continued increases). 4. Today’s chart Continuing Jobless Claims suggests that we have broken past both the increase in claims average of 424k (to 1.734 mln) and we are into month 11 which is the average timeframe of increases prior to recession commencement. - Todays chart is suggesting we are already in a recession or have just started into one. Another breach back above the 1.734 mln level (average level) would be a good confirmation signal that the risk of recession remains on the table. With this in mind it is important to recognize that on average official declaration of recession can be declared up to 8 months after a recession has started, so we should be on the look out for indications of a recession starting (without the official declaration). Today’s chart and the above charts suggest the following: 1. Significantly increased risk of recession from the 2nd half of September 2023: - 2/10 year Treasury Spread 6 – 22 month recession risk window opens from Sept 2023. - Average timeframe of increases in continuous jobless claims prior to recession is from the 2nd week in September. - The last time the Federal Reserve paused interest rates, the COVID-19 crash occurred 6 months later. 6 months from a Sept 2023 pause would be March 2024. 2. The Recession Risk increase higher from Nov 2023 - Average timeframe of increases in Initial Jobless Claims prior to recession is hit. Adding to the above concerns is that M2 Money supply is still reducing (Macro Monday 8) and Global Net Liquidity is continuing to reduce (Macro Monday 4) as the S&P 500 is hitting a major resistance zone when accounting for M2 money supply (Macro Monday 8). At present it is clear that liquidity is reducing both globally and in the US. Currently fiscal stimulus appears to be filling the gaps and may be causing additional lagging effects to the changes we have seen imposed by Federal Reserve (balance sheet reduction and increased interest rates). Keep in mind that the Fed is also targeting higher unemployment to help quell the effects of inflation thus adding to the relevance of the Initial Jobless Claims and continuous jobless claims numbers. We can monitor these charts on my trading view just by pressing play and seeing where things are going. Regardless ill be providing updates along the way of claims releases and other important data. Be safe out there as we enter into a high risk zone (no guarantees) PUKA
ECONOMICS:USCJC
by PukaCharts
2
Core and Headline CPI RELEASED (Dec 2023 figures)Core and Headline CPI (Dec 2023 figures) U.S. Headline CPI Prev: 3.1% Exp: 3.2% Rep: 3.4% 🚨 HIGHER THAN EXPECTED 🚨 U.S. Core CPI Prev: 4.0% Exp: 3.8% Rep: 3.9% 🚨 HIGHER THAN EXPECTED - but still fell from 4% to 3.9%✅ CORE CPI FALLS BELOW 4% FOR THE FIRST TIME SINCE MAY 2021 We have a long way to go before we reach the Fed Target of 2%. Additional info previously shared: Core vs Headline (the difference) You can clearly see how Core CPI is less volatile than Headline CPI on the chart. Core CPI removes the volatile food and energy expenditures to provide the underlying inflation trend. Food and Energy is included in the Headline inflation which as you can see from the chart is much more volatile and changes direction quicker than core inflation. Its almost like an oscillator around the core inflation line. The Feds 2% Target It is clear that we are not at the Federal Reserve’s target inflation rate of 2% on both fronts (purple line). It is critical to understand that we are still not at or below the target 2% level regardless of the FOMC’s determination of a likely hold on interest rates and reductions to interest rates in 2024. Lets see can the target be met first. You can see that since 2002 Core CPI has fluctuated one standard deviation above and below the 2% inflation level between 1% and 3%. It is clear that we are not back into this standardised zone between 1 – 3%.
ECONOMICS:USIRYY
by PukaCharts
Core and Headline CPI (Release Tomorrow Thurs 11th Jan 2024)Core and Headline CPI NEW CPI Figures released tomorrow Thursday 11th Jan 2024 @ 7:30am Central (for the December 2023 month) U.S. Headline CPI Prev: 3.1% Exp: 3.2% Rep: TBC Tomorrow U.S. Core CPI Prev: 4.0% Exp: 3.8% Rep: TBC Tomorrow Will the US Core CPI finally fall below 4% for the first time since May 2021? Core vs Headline (the difference) You can clearly see how Core CPI is less volatile than Headline CPI on the chart. Core CPI removes the volatile food and energy expenditures to provide the underlying inflation trend. Food and Energy is included in the Headline inflation which as you can see from the chart is much more volatile and changes direction quicker than core inflation. Its almost like an oscillator around the core inflation line. The Feds 2% Target It is clear that we are not at the Federal Reserve’s target inflation rate of 2% on both fronts (purple line). It is critical to understand that we are still not at or below the target 2% level regardless of the FOMC’s determination of a likely hold on interest rates and reductions to interest rates in 2024. Lets see can the target be met first. You can see that since 2002 Core CPI has fluctuated one standard deviation above and below the 2% inflation level between 1% and 3%. It is clear that we are not back into this standardised zone between 1 – 3%. I’ll update you tomorrow with the released figures PUKA
ECONOMICS:USIRYY
by PukaCharts
Mind the gap!DISCLAIMER NO BUMS allowed, if you don't like making money and consistently downvote radical ideas and thinking because you are bitter and haven't made money for the past 12 months, then stop following me and LEAVE. This is a strictly NO-BUMS allowed post.... DXY usually follows deficit, and although for the past 10 years, we have seen stagnating growth in the EU and Japan, I think we could see a different story for the next 2 years. The US cannot continue to spend money it doesn't make and put it on the countries credit card (see story on 1.6Tr spending bill approved) and not suffer any consequence to its already mamouth 34Trill debt. Something has got to give, they either stop spending (aint gonna happen, it's war machine needs the money) or the Dollar will crashes down to 89.... At some point, investors will stop buying government bonds, wanting to be better rewarded for taking on the risk. This means the treasury will have to resort to its mom and dad bank (Fed reserve balance sheet) when it comes to funding its spending. Already Fed presidents Lorie Logan suggested slowing asset runoff as reverse repo dries up. This is a precursor to restarting QE later this year when the Treasury has to refinance 10Tr worth of debt and it fails to find any bidders at a paltry 2.5% (which market participants are suggesting is the neutral rate). In another view, EURUSD typically benefits from a fall in dollar such is the historical basket weighting being heavy German Deutsche Mark Good hunting, and remember, don't be a bum by downvoting fresh ideas!
FRED:FYFSD
by Macro-Traders-Strategies
1
Business Cycle Rotation Part 5In the first four installments we described an exercise utilizing the momentum in asset classes, the relationship between those classes and the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (CLI) for the United States, to anticipate the business cycle and markets. In the last installment we discussed the changes from the end of 2022 until October 2023 and interest rates. Those posts are linked below. In this installment we address the macro environment. Since October when this series was mostly written, several markets have made promising changes in their momentum states and chart patterns. But this is a teaching exercise so we will mostly work with the data available at the end of September 2023 and mostly ignore the dramatic changes of the last few weeks. It is said that markets are discounting mechanisms, anticipating change in the business cycle. I believe that it is generally true, and while it has been less true for much of the last two decades, it is about to become true again. It is my view that a large portion of the bull market of the last fifteen years is largely an artifact of the liquidity flood that followed the 2008 financial crisis. Starting in the late 1980s the deflationary forces created by globalization and technological advancements enabled central bank activism and allowed fiscal authorities to run massive deficits without readily apparent repercussions. The willingness of monetary authorities to support asset prices rendered the business cycle mostly benign and economic signals generated by the markets less useful. Bullish trends became longer and more entrenched, dips better supported, overbought conditions persisted longer while oversold conditions were fleeting. Counterproductive trading and investing behaviors and bad analysis were continuously bailed out by policy. I believe that there has been a shift in the inflation regime following the pandemic and as a result, an enduring shift in monetary policy. Central banks will be more focused on fighting inflation and liquidity, except during episodes of explicit systemic risk, will be far more constrained. As a result, the rates/commodity/equity link will become strong again. At the same time, high debt levels and debt servicing costs will increasingly severely constrain fiscal policy. Generally speaking, more frequent periods of higher inflation and higher debt burdens should result in higher yields and an economy that grows below potential. There will be growth constraints on commodities, and equities whose earnings are constrained by higher rates and inflation. Markets will become choppier, dips larger, overbought conditions persist for much shorter periods while oversold conditions become more numerous and deeper. Counterproductive trading and investing behaviors and bad analysis will be far less likely to be bailed out by policy. Importantly, in a more inflationary environment, debt and equity will be mostly positively correlated, mostly rising, and falling in tandem as inflation ebbs and flows and during periods of systemic risk. Distortions from massive monetary and fiscal liquidity introduced during and after the pandemic continue to reverberate through and distort markets and growth. I think this is best illustrated by M2 money supply. The bottom panel is the 12 month rate of change. This is the chart that I see used most often to describe liquidity. You can see the extreme M2 expansion during the pandemic and the subsequent sharp contraction. In my view, this represents the "flow" of liquidity. The flow has declined significantly over the last 2 1/2 years and is now negative. This has led many to conclude that the liquidity is constraining both markets and growth. On the other hand, the top panel is M2 regressed from the Black Monday stock market crash in 1987. I think of this as the "stock" of liquidity. Viewed in this manner the 'stock" is still more than 2 standard deviations above the long term growth line. In my view, changes in "flow" probably do not matter nearly as much when available "stock" is this high. Anecdotally this chart helps explain my general observation over the last year that markets continue to trade as if liquidity remains plentiful. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
ECONOMICS:USM2
by CMT_Association
3
Raising Liquidity in ChinaChina pumped the most liquidity into its financial system via short-term policy loans on record, a sign policymakers are likely to keep interest rates low to bolster a nascent economic recovery. The People’s Bank of China granted lenders a net 733 billion yuan ($100 billion) of cash with so-called reverse repurchase contracts on Friday. Only a few days after the central bank made the largest injection of one-year policy loans on Monday. The injection of extra cash into the economy give a much-needed boost to China’s growth, which has been challenged by a lack of demand and a downturn in the property market this year. It will also provide lenders with sufficient funding, as Beijing and local governments are set to sell more bonds to finance stimulus spending and as the tax payment season approaches. Thus, this wealth effect will trickle down into risk assets (especially crypto) as interest rates continue to decline, alongside this. As it can also be deduced that Beijing likes to frontload Liquidity in the early months of the year. Thus Crypto is long
ECONOMICS:CNINTRLong
by BackQuant
1
Fed's Hope in 2024 - Their Projection & PlanDuring the December FOMC conference, the fed said the appropriate level for interest rate or the fed funds rate will be 4.6% at the end of 2024 from current 5.5%, 3.6% at the end of 2025, and 2.9% at the end of 2026. Many reporters take that as Fed’s hint to cut rate in 2024, but the Fed added saying these projections are not the committee decision or plan. So what is the difference between a projection and a plan? And how will the market performance in 2024? Dow Jones Futures & Options E-mini Dow Jones Ticker: YM 1.00 index point = $5.00 Micro E-mini Dow Jones Ticker: MYM 1.0 index points = $0.50 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
ECONOMICS:USIRYY
by konhow
4
A downturn is imminent - 10 Year Treasury Note based analysisIn recent years, many of us acknowledge that the term "recession" has been appearing in news and social media outlets at an increasing rate. While it acts as great clickbait, most sources tend to avoid to avoid a more fundamentals data driven approach, but rather are preferential an opinionated viewpoint from which their viewers can relate. Here I propose a more decisive graphical proof of why I believe some sort of downturn is on the (medium term) horizon, using the 10 year US treasury bond as the foundation, and comparing its recent movements to other typical recession indicators at a long timeframe. The top graph shows the US YoY interest rate divided by the US 10 year note. Bonds and the interest rate are very closely economically correlated, deviations in the ratio between these two factors provides a very strong indicator (historically) for recession territory. 7 out of 8 times where the white line around 1.2 has been crossed on the 3M chart, as shown by the bottom graph, unemployment is quick to follow with rapid and sharp increases (beginning from red vertical lines). This white line acts as the point of no return for the economy medium term. The maximum threshold by which historically the balance of the economy tips in one direction, bursting bubbles in favor of what people call a recession, and eventual return to an equilibrium (stability). This was hit in December 2022. While its very hard to tell the exact point where the downturn begins after this point, its obvious (based off this chart alone) one is around the corner. By no means is this solid proof of anything in the future, but a very simplified graphical comparison between the ratio of two major economic data trends and their historical impact on the rate unemployment. If these historic trends continue to remain strong (as they have done with 88% accuracy since 1971) we should expect a significant economic downturn on the medium term timeframe, between 3-18 months from now. This is not financial advice, derive what you will from this data, let this idea act only as a point of interest - however, I urge sensible and thoughtful investing/trading on medium/short term timeframes with a bias towards the downside and continues high volatility.
ECONOMICS:USINTRShort
by Shelly
3
2024 inflation lower but 2026-2028 might be different trendnote: this is just precaution, a risk management, a bad scenario when happen, and know why it could happen there an article in twitter posted by Kobeissiletter (the source of picture) it making similar movement like stagflation which potentially could see a higher inflation later but we are not in stagflation because inflation and unemployment still low and based on 1970s there is oil shock too An oil shock refers to a sudden and significant increase in the price of oil, usually due to a disruption in the global oil supply. This can result from geopolitical events, natural disasters, or other factors that impact the production or distribution of oil on a large scale. Oil shocks have historically had profound effects on the global economy, often leading to economic recessions and changes in economic policies. The 1970s witnessed two major oil shocks: 1973 Oil Crisis: Trigger: The Organization of Arab Petroleum Exporting Countries (OAPEC), consisting of Arab members of the OPEC, proclaimed an oil embargo in response to the Yom Kippur War between Israel and a coalition of Arab states in October 1973. Effect: Oil prices quadrupled, leading to a significant increase in production costs for many countries. This contributed to a period of high inflation and economic recession in several oil-importing nations. 1979 Oil Crisis: Trigger: The Iranian Revolution in 1979 led to a disruption in oil production in Iran. Additionally, the Iran-Iraq War, which began in 1980, further strained oil supplies from the region. Effect: Oil prices surged again, exacerbating inflationary pressures and contributing to economic challenges in various countries. The second oil shock reinforced the economic difficulties already present from the first oil crisis. ------------------------------------------------------------------------------------------------------------------ Stagflation: Stagflation is an economic phenomenon characterized by a combination of stagnant economic growth, high unemployment, and high inflation. Typically, inflation and unemployment move in opposite directions, but during periods of stagflation, both can be high simultaneously, which poses a challenge for policymakers. In the early 1970s, inflation started to rise, driven by factors like increased government spending, loose monetary policy, and the cost-push effects of rising oil prices. The Nixon administration implemented wage and price controls in 1971 in an attempt to combat inflation, but these measures were largely unsuccessful. In 1973, the first oil shock occurred, leading to a significant spike in oil prices and contributing to inflationary pressures. In 1974, inflation reached double-digit levels, and the U.S. experienced a recession, marking a period of stagflation. In the latter part of the 1970s, there were efforts to address inflation through tighter monetary policies, but these measures initially had limited success. The second oil shock in 1979 further exacerbated inflationary pressures. It was only in the early 1980s, under the leadership of Federal Reserve Chairman Paul Volcker, that a more aggressive monetary policy was implemented to bring inflation under control. This involved raising interest rates significantly, which eventually led to a decline in inflation, albeit at the cost of a severe recession.
ECONOMICS:USCCPI
by salvanost
The most important chart in your trading career.Merry Christmas to all, I hope you and yours are well. My present to you this year is the one chart you should ALL be watching. SPX/GOLD Risk On (Equities), Risk Off (Gold). It will save you a TON of time/headaches, if you follow this chart. In this video I go over why you should use it. How your portfolio would have been managed the last 50yr, and at the end give a quick method for managing your ratio between Risk On/Off. As always, good luck in your trading, have fun, and practice solid risk management.
FRED:M2SL
by mrjones2020
6