Visual on why Crypto got you used to gainsIt is just because no Crypto has ever experienced a real big crash. And now we are approaching the Great Reset.
No DCA will save you here.
US10Y trade ideas
Yields vs. SPX - proof we started too earlyThis is proof we started declining too early and we can still expect a lot of wonders before the actual crash. Before we truly don't go above 0 on Treasure yields - we can still expect some push to the upside - and even significant ones.
Trendlines and Channels Tutorial: Part 3Before we get started on trendlines and channels I want to share a quick thought on the current market environment and how, at least in my opinion, the technical environment has changed.
I believe that the weight of the evidence suggests that we are in the early to mid-stage of a primary bear market. If that is the case, momentum and sentiment extremes, breadth thrusts, and other conditions that have reliably produced tradable lows over the course of the recently completed primary bull market are far less likely to create meaningful/investable lows. For a low to be trusted for more than a quick trading turn will require multiple techniques and confirmations, while shorts into rallies and interim highs can be sold much more safely than at any time since the 2008 lows.
If global central banks, and in particular the Federal Reserve, continue to tighten policy, markets are at significant risk. In particular I believe that QT is the more important driver of asset prices. I don't foresee a pivot anytime soon unless there is a financial accident. Even then, it’s not likely that the pivot will include a long term reversal of policy. If inflation remains high, pivots are likely to pauses in the tightening cycle and not a lasting reversal.
Ten Year Yields: For clarity and simplicity I will treat this uptrend in yield as a bull market (although it is actually a bear market as higher yield = lower price). To keep it simple I will label the uptrend in yields as if it were a bull market and use that terminology.
The hourly chart of US Ten Year Treasury Yield offers another example of a consistent demand line coupled with a clear supply line. As discussed in parts 1 & 2, trendlines and channel tops evolve over time and are typically messy.
Construction: Yields began inflecting higher in very early August (A) and over the next few weeks began making higher highs and higher lows.
The first significant low occurred August 10, and soon after, the initial demand line (A-B) could be drawn. This demand line did an excellent job of defining the stride of the trend for the next two months.
At that point there was a solid intervening high pivot between the two low pivots that could be used to draw the initial supply line. After the late August pivot, I moved my initial supply line lower.
From September 13- 22 the market traded in the upper portion of the channel for an extended period (period in the oval). Downside reactions began consistently holding in the area around the channel median/central line. This is typically a sign of strength. Note that this was the third time during the sequence that price had held in the upper portion of the band for an extended period. Granted, there were two periods where price was below median, but both periods were relatively short and the totality of time spent above median was far greater. This was clearly a market where demand is outstripping supply by quite a lot (remember that since this is yield, we are treating the uptrend as if it were price, so in actuality, holding in the top portion of the channel represented superior supply).
Soon after this show of strength, the market pushed above the top of the supply line. Overthrows of this nature are often terminal, ending the trend. Often, breakouts find fresh supply at roughly 1 channel width above the breakout. This one exceeded that modestly.
Often (as is the case here) once the original channel is reentered, it will again begin to act as support and resistance.
In the next installment we will talk about combining channels with other chart and oscillators and some notes about using channels to trade against.
And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum.
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.
Forecast US10YGood day everyone! Don't forget to put your thumbs up and write your comment if you like the idea
The bar for 10-year Treasuries has been broken.
The 10-year Treasury yield has broken the trend at 3.8%. In fact, this opens the way for growth to indicators in the range of 4.5-4.6%.
There are elections in November, and we need to show at least some effect from measures to combat inflation. This is the main task. Well, what's next? Let's assume that we managed to somehow stabilize the situation with inflation (actually or by manipulating statistics is another question) by achieving a target rate of around 4.5%. Let the economy go into recession. And, after some time, start the cycle of lowering the rate again and pulling the economy out of recession? The current rates were in 2008, and the values were 4.5% in 2007. And the Fed had enough of this "reserve" in reducing the rate for almost 14 years.
DISCLAIMER:
The opinion of the author may not coincide with yours! Keep this in mind and consider in your trading transactions before making a trading decision.
US10Y - shall we take a breath before another hike?From a technical perspective it seems to me that we may see a short correction before another FED's decision. Potentially it may make SPX take some weight, which - I believe - it will loose soon after.
Crash incoming 5? (Update 2)Although the market is broken or almost broken right now (surprisingly TLT joined the crash 'party'), central banks will be forced to print more money (this is it's already happening in some countries) and to pivot. Nevertheless, based on the data, when the US10Y-US02Y reverse to the upside in the following weeks or months, there is still a strong possibility that the market could crash even more (as you can see, this was not the case in the beginning of the nineties). I believe it's because when they eventually shift, the economy is already broken (very high rates, high inflation, high unemployment, debts, etc.).
Regardless of what may happen, patience, check out my latest idea ("Crash Incoming 6 - Update 3") to find out when it will be less risky to buy stocks or to sell them.
One more gold thesisThe way I read this chart is as follows:
GLD is at max inverse correlation with the US10Y . Same for USO which has reversed a period of positive correlation (due to the monetary expansion driven growth) and is also now in maximum reverse correlation. As of this Gold offers a materially better investment profile versus Oil.
SP500 is as well in inverse correlation with the US10Y, but this correlation appears more cyclical and can reverse once the damage to the economy and market starts going too far (flow into the safety of US treasuries).
As such Gold seems the preferable instrument in taking a contrarian view regarding the reversal of bonds , getting protection against a tail event , and upside exposure in case of a melt up . In case of a further US10YR increase the downside risk can be limited by a short trade on the EUR.
Counterthesis to a long Gold position is Scenario 4 , but in all other states of the world the investment profile of Gold is really compelling and this could start driving inflows at this point.
Sc 1 - Accident : Gold + / USD + / SP - / 10Yr - (inverse correlation remains)
Sc 2 - Risk on : Gold + / USD - /SP + / 10 yr - (inverse correlation remains)
Sc 3 - Inflation and rate hikes : Gold - / USD + / SP - / 10 yr + (inverse correlation remains)
Sc 4 - Recession : Gold - / USD ? / SP - / 10 yr - (inverse correlation breaks)
US Treasury yields expected to stay bullish10 Year Treasury rate is expected to hold upside momentum as long as it stays above 3.5%. Given the current pattern, it is likely to see the yield on the U.S. 10-year Treasury climb to 4.5% by the end of this quarter.
Support: 3.5% & 3.82%
Resistance: 4.5% & 5%
Thoughts on rates, bull markets, bear markets, and QEHey all,
I wanted to post a few thoughts of the somewhat educational variety. Hopefully this will help with perspective on where we've been and why I continue to see equity market weakness for the extended and foreseeable future (1-3 years maybe). So starting with this chart, this is the 10 year US Treasury yield below and the S&P 500 index above going back to approx. 1980. It's log scale to make each asset more meaningfully represented. What we notice about the 10 year yield relative to equities throughout this ENTIRE 40+ year period is that it has been on a steady declining slope as the S&P has seen significant growth and gains. The numbers for each over this stretch are as follows.
10 Yr Yield High: 16% (nearly) in Sep '81
10 Yr Yield Low: .33% in March '20
S&P 500 Low: 100 (roughly) in March '80
S&P 500 High: 4820 in Jan '22
Actually this is really interesting and I didn't realize this till now running these numbers. The 10 year yield has contracted by 48x while the S&P 500 has gained 48x over the same period... A note on falling rate environments....they're bullish for stocks. We have been in this period of steadily lower rates over time to the tune of 48x and the stock market reflects this favorable environment with the exact same multiple in growth over the same period.
Now, we all know that the FED is on a mission to tame inflation with higher interest rates..Take note of the 10 year low in Mar '20 of .33%. I believe that low will hold for the remainder of our trading careers as we see a period of steadily INCREASING rates to counter this 40 YEAR accommodative run. In the short-med term sure the FED is looking to boost into the 3-3.5% range for their target rate. Be advised that 3% is 6% shy of June CPI (9%) which puts us still in a REAL accommodative rate environment. They're gonna have to match inflation (with target rate) and then some to have it sustainably reverse course. CPI could come down as part of this process and I think it will. Let's say it fall to 6%. Better, right? We'd still need a fed target rate at 7% + to meaningfully throw water on inflationary forces. I guess what I'm saying is...3.5% is a neat target, but we'll have much higher to go beyond that. I see this as a give and take over the coming years as rates make new highs which puts equities in a tough position until this process plays out. I'm kind of looking at 2000-2003 period of multiple contraction post dot com bubble as a reference for this current environment. Sorry, the bottom is not in and it could take years to get there.
Ok all that said I wanted to also clarify some things regarding Quantitative Easing and what it actually means when we say the Fed is "Printing" Money. The Fed engaged in QE first time around in November 2008. I remember pretty well as I was working in Midtown Manhattan for an asset management firm and we were in the thickest part of the financial crisis. CNBC was on perpetually for our desk of sales people...Anyway I see a lot of folks referencing FED printing and their balance sheet but often the context or implication of this concept is apparently misunderstood by many in TV chats and comments. Being a nerd, and having worked for the largest bond manager during the first QE, the firm was with was instrumental in helping guide the fed through that stretch...I'm gonna lay out how QE works for all to observe (if you are not clear already).
Quantitative Easing (QE) is when the FED purchases US Treasuries and or US mortgage backed bonds from the open market. The real purpose of this strategy is to lower or maintain low borrowing rates for the US Gov, US mortgage borrowers (homeowners) and by extension bc the US Treasury is the benchmark, all debt and borrowing rates. QE is typically employed as a supplemental strategy once the actual FED target rate is at or near 0%...can't go lower right? Wrong, kinda....this is where the FED would likely utilize QE if rates at 0 but they still wanted to do more to stimulate growth/be accomodative. When the FED buys US treasuries or mortgage backs, it sends those yields lower. This rate influence impacts the entire bond and rates markets by extension as a lower benchmark bc there's a huge buyer of US bonds! the FED to the recent tune of $9 Trillion. I'll pose the question..."where'd they get the money?" They just kind of acted as if they had it....and bought the bonds...and held em. Without actually printing it, the impact of this is as if there were $9T more dollars in circulation and far more demand for treasuries than is reality.... They lowered interest rates without changing their target rate (which was already at 0%) and did so by theoretically "printing" the money to make the purchases. That's it, that's QE. Worth mentioning that we are now in QT (tightening) and they are selling those same bonds back effectively removing the "as if" $9T from circulation.....it never really was in circulation but QE simulates as if it were...This selling of US Treasuries and MBS is what they refer to as reducing or unwinding their balance sheet. $95 B/ month currently I believe.. Bear in mind that these sales will have the opposite impact on rates as the purchases so while the fed is raising their target rate 50-75bps per meeting, there is an additional impact on the bond market from QT.... If you read this far my hat's off to you. Hopefully someone learned something...thanks
~B
US10Y - Looking ParabolicAfter a 40 year bull run we are seeing a significant counter trend movement. Sitting at .23 retrace, if this fails could we see .38 and the US10Y at 6% ?
govt bonds rising hardoh look at the 10 y bond yields
from the major economies.
only 2 years ago Govt could borrow very cheaply
but all good things come to an end.
now govt have to pay more for borrowing
to fund their profligate spending... on guns
and butter.
china can no longer export deflation with cheap goods.
RMB is too strong these days. the game is up.
let the bankers take nations to war again.
oh wait its already happening.
US10Y Pull-back aiming for the 1D MA50 at least.This is the U.S. Government Bonds 10YR Yield (US10Y) on a 2 year horizon. As you see its aggressive rise can fit only on a Fibonacci Channel. The recent pull-back happened after the price hit the 2.5 Fibonacci extension and the 1D RSI a largely overbought level and the price is already on the 2.0 Fib.
As you see, the strongest buys throughout this period have been then the RSI hit the designated Support Zone. Also the strongest pull-backs dropped the price a whole 1.0 Fib level lower. From the previous 2.5 High, the low extension is at 1.5 and that gives us still some room to sell and target at least the 1D MA50 (blue trend-line).
Technically it would be best to buy once the 1D RSI enters the Support Zone again, even if that means missing on the lowest possible level. From were we stand today that could be as low as the 1D MA200 (orange trend-line). Regardless of the exact bottom, as long as the 1D MA300 (red trend-line) holds, which has been supporting since January 06 2021, the bullish target is the 2.5 Fib and the 3.0 in extension.
If the price breaks below the 1D MA300 though, we will consider this a long-term trend change to bearish and should switch to a sell-the-rebounds strategy. That would affect all asset classes from stocks to Gold etc, but when that happens we will have plenty of time to analyze it.
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10Y omnious signallingBlow-off in the making? 87 correction on deck? Target date late oct / early nov.
Morning Update: Bonds vs. The MarketYesterday I saw some comments about how bonds yields have come down recently and that is one of the components aiding the stock markets recent bull run. The above chart is the 10yr Treasury. If you could flip this chart upside down, it would be a chart of the SPX.
Here's my concern with this chart and how I'm looking at the SPX. This pattern is not done to the upside in the 10yr. It appears this trend continues well into 2023....where as I am looking for a bottom in the SPX this month or beginning of November. I believe every chart stands on it's own. But its hard to ignore the long standing inverse correlation between bonds and stocks. If this correlation continues into 2023...(I have no information to think I will not) then it is possible this low I'm looking for soon in stocks is just a larger A wave and this wave IV in the SPX and this pattern could drag well into new year.
We will know if the next decline in the SPX is one in which we loose any MACD positive divergence we have had on the daily SPX.
Best to all,
Chris
Updating this very old US10YThe bond bull is over and the new path to rising rates. It looks like we have reached the resistance of the red box , there is a chance we do an over shoot like we did at the bottom and then reverse to the green box ( which will be adjusted is the if we over shoot). Then we keep rising in a wave like manner.
Correlation of Bond Yield and US500Simple comparison between the two, we can see this correlation happened twice in recent times. With bond yield attempting making lower highs and lows, we can see US500 index are starting to rise up from the ashes. Targeting 4000 for US500, US10Y at 3% in a month or two, before some BS news gonna pop and kill the rally for the equities. Recession is inevitable after years of money printing and lending to prop the economies. Dollar index are nearing multiple decades high. Tough times are coming. Those who prevail shall be the next wealthy people; provided they are prepare for the next opportunity in the market.
10 Years US Treasury Yield - ShortThe yield has just completed a prefect impulse cycle with a fifth wave projection at 123%.
We recommend going short the yield (long the bond) with a tp target at 2.90/2.60.
10YY up trend breakYesterday markets responded positively to a clear break out from the recent up trend in bond yields as shown on this chart. Anticipation of Fed reversal? Maybe, but I think its a good idea to watch what happens at the support levels below where we are at now.
Market recapWith the interest rate hike correlation to US10Y Bonds, as the rates are rising we are seeing demand for risky assets drop off, people are cashing out of these asset classes and money is moving to bonds, in consequence we are seeing the USD start gaining great strength.
The US10Y market is very interesting, as we appear to have broken a downtrend on the weekly chart going back decades, trendlines are neither here or that but with such a long history does this maybe add any more validity? (Who Knows).
Going forward we could see XAU make moves from its old value area and make a move down to pre-covid inflation around $1200-$1300.
I recently posted a short in the US stock market which I have attached below of where I believe the market will price in if what we are seeing in the rates and bonds continue to occur.
Crypto being the most risk adverse of assets discussed here and the volatility involved imo holds the greatest risk yet, although we could see this obscene dollar valuations as a rare occurance? maybe a DCA approach can lead to good returns overall. However I see large falls inbound whether they happen this week or next who knows, but it is a risky asset class to hold in potential market turbulence we could see over the next few months.
NY session recap: +2R for the dayThis video is a recap of the trading session over the equities hours in NY. Made 2R for the day. Keeping an eye on USD and yields and looking for renewed strength for explosive trade setups later in the week.
Oct 3rd W1 Pre-open analysis: AUD/USD bears lurking AUD/USD broke a weekly level and the focus stays on the downside for the week ahead.
