ten year yield plummetsToday the 10YY has proven that the last breakout turned out to be false as Treasuries are being bought hard. I think this is a fear move because of banking issues. Usually a lower interest rate / yield would be positive for stocks but not necessarily in the face of other bad events happening.
US10Y trade ideas
YIELD CURVE HAS LIKELY BOTTOMED--RATE HIKES WILL ENDthe #yieldcurve 10y2y. The Weekly Chart has a picture perfect hammer candle striking EXACTLY at the 1.0 Fibonacci Extension at -1.081%. This fibonacci bounce, coupled with the banking crisis, and the huge drop in the 2y yield (BIGGEST DROP IN 2Y SINCE 1987), leads me to believe the curve has bottomed.
US10Y - SVB Smokescreen ๐นWho knows maybe its a coincidence ๐น but SVB collapse happened on Friday and on the very same day the first US10Y bearish momentum candle printed pulling down and away from the long term Fibonacci cluster and the Demand Line from the lows.
Friday was the first day the yields bear took over.
The 3rd wave before the collapse grinded up the Demand Line and then printed a mini blow off top shakeout reversal pattern.
FWIW we shorted TBT to take advantage of the decay as the day MACD lines crossed on Wednesday.
But anyhow the take home point is that the news have scared everyone away now.
Everyone now knows its a terrible time to buy, especially anything classed as "risk on."
Meanwhile the crypto bull market has been going 2 months.
And the stock bull market is about to begin.
Its the same game at every bottom - works every time ๐น.
Not advice.
US 10 Year Treasury The bond traders are the most accomplished on he street.
This chart shows the blow off from news.
It is important that we understand the if rate sink more this will but a huge pressure on all stock and upward push on gold.
Please look at this chart and understand that a interest move much lower could cause a huge reaction
Biggest Drop since 2008 - Right After our Post ๐Good that I always TRUST my Charts:
US Government Bonds 10 YR Yield has dropped 'nicely' since my last post, which was 'against the stream' since when i posted it Powell was being extra-Hawkish and situation was different.
News:
The yield on the 2-year Treasury note fell sharply on Friday as the shutdown of Silicon Valley Bank sparked a flight to safer assets such as government bonds.
The yield shed at least 46 basis points over a two-day period, a sudden decline not seen since September 2008 , when the markets were in the throes of the global financial crisis. Perhaps by no coincidence, the flight to bond safety this week was caused by the biggest bank failure since the financial crisis.
These were supposed to be 'Good news', rates could ease and markets (and crypto) could do better but unfortunately it all happened for the wrong reasons: Some Banks going bust.
Better check my other posts today.
Everything changes FAST so watch out for the CPI tomorrow: If inflation is better the Feds are saved...if inflation persists we could ALL be in DEEP trouble.
One Love,
The always optimistic Professor
US10Y long view, target zone 3,0%-3,25%This example shows how the US10Y has been moving in a bullish trend since the beginning of 2020 (at 0.345%). From the bottom, we have a trend line as support, after which the first higher high was formed at 1.75% (resistance zone). Then follows a pullback to the lower support line and a new bullish consolidation up to the previous resistance zone. In January, we see a break above the resistance zone, and that zone now represents a support zone for us to continue the bullish trend. US10Y makes a new higher high to confirm the continuation of the bullish trend, then we retest the support zone, and a bullish impulse follows. Now our target is 3.0% psychological level and after that the previous high at 3.25% level.
Treasuries are in flat till autumn5 wave structure between Aug 2021 and Oct 2022 seems complete since the interment broke though the trend channel. Most likely the it will be forming a sideways correction flat of triangle. I see two possibilities:
scenario #1: it goes up to 4.3% and then fall towards 3.3% or
scenario #2: it goes down to 3% and then go up to 4.3% and down again to 3% level
if 4.3% gets reached first then it is opportunity to sell USD, alternatively (if 3% gets reached first) then it is a chance to buy USD.
Us 10 year yield is dropping warn signDue to big movement into markets today and banks getting sold out... we are getting into a neutral position on rates.... IF rates drop bellow 3,5% we are probably going into a recession... without way back for my perspective! No add position... total neutral now
US10Y Bearish short termThe US10Y reached the top of its Channel Up and is reversing on a Head and Shoulders formation.
Top made very close to the 0.786 Fibonacci.
Trading Plan:
1. Sell on the current market price.
Targets:
1. 3.575 (MA200 (1d) and Fibonacci 0.236).
Tips:
1. The RSI (1d) is on a Rising Support. An additional indication of when to take profit.
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10 YEAR TREASURY: POTENTIAL SETUP FOR A CRASH?The 10 Year Treasury is showing signs of weakness flashing on a 3 Week timeframe
Following our recent run to 4%, this may have been a dead cat bounce before resuming a clear downtrend
In addition, the 3 Week MACD has printed a red candle, which is the first since December of 2018 (when looking at candles flip from green to white to red)
Ironically, December of 2018 was when the Fed U Turn happened after the last hiking cycle...
If CPI comes in under expectations (which, according to Truflation, is very likely as we currently hold at 4.78%.)
Expect Yields & $DXY to drop like a stone, & the start of the next bull cycle
Nothing will stop what is transpiring in the charts, there is no 2nd wave of inflation, no debt crisis... if there was, the markets would crash, but you cannot fight the trend
US10Y - US02Y predictor for major recessionsMarket risks are increasing day by day and the following inversion ( US10Y - US02Y ) might hit markets severely leading to a massive correction.
BlackRock 2023 Global Investment Outlook is in line with the warning and they are of the opinion that we are facing recession, stubborn inflation , and a new era that won't be so kind to investors.
๐ฅ Bond Yield Curve Inversion Reaching -1%: Why It's ImportantAn inverted yield curve occurs when the yield on a 10-year Treasury bond falls below that of a 2-year Treasury bond. Normally, longer-term bonds have higher yields than shorter-term bonds. This is because investors demand a higher return for tying up their money for a longer period of time.
However, when short-term interest rates rise above long-term interest rates, it can indicate that investors believe the economy will weaken in the future. This is because investors are willing to accept lower yields on long-term bonds if they believe that interest rates will fall in the future as a result of weak economic growth. Essentially, they are willing to lock in a lower yield now, in the hopes that it will be higher in the future.
An inverted yield curve can lead to a number of problems. For example, it can make it more difficult for banks to make money. This is because banks borrow at short-term rates and lend at long-term rates. When the yield curve is inverted, the interest rates that banks earn on loans are lower than the interest rates they pay on deposits. This can squeeze bank profits and make them less willing to lend. And we all know, less money in the market means less potential (risky) investments.
An inverted yield curve can also be a sign of a potential recession. Historically, an inverted yield curve has preceded every recession in the United States since WW2. This is because an inverted yield curve can indicate that investors are pessimistic about the future of the economy. They may be selling off stocks and other assets, which can lead to a downturn in the stock market and a decline in consumer confidence.
In conclusion, an extremely inverted yield curve like now is a situation in which short-term interest rates on government bonds are higher than long-term interest rates. This can indicate potential economic problems, including a recession and difficulties for banks. While an inverted yield curve is not a guarantee of a recession, the probability of the current yield inversion suggesting a coming recession is very high.
It's going to be an interesting year.
US10Y Double rejection. Targeting the 1D MA200.The U.S. Government Bonds 10YR Yield (US10Y) has been trading within a Channel Down pattern ever since the October 21 2022 High and even though there might be a Diverging Channel Up (dashed lines) emerging, the current level makes a strong Resistance cluster.
With the 1D RSI also rejected twice on its Higher Highs trend-line, we are turning bearish on the US10Y again, targeting the 1D MA200 (orange trend-line), which supported the price twice on January 19 and February 02. Potential contact (as a target) can be made at 3.550%. We will continue to be bearish only if the 3.320% Support breaks.
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United States 10-Year Bond Yield - AT RESISTANCE ๐คจ๐Massive level of resistance has played out and Stocks could power higher as Treasury yields and dollar might ease further.
4,22% has been a Major Support/Resistance level (S/R as you can see on the chart) and the prices down have dropped even lower, below the psychological 4%
What does that mean?
When US government bond yields are on resistance, meaning they have reached a point where they are likely to reverse direction, it can have a significant impact on various aspects of the economy and financial markets.
One of the most immediate effects could be on the stock market. Higher bond yields could lead to a sell-off in equities as investors may shift their money from riskier assets to safer ones like bonds. This could result in a temporary decline in the stock market and a potential increase in market volatility.
The impact on the broader economy is more nuanced. Higher bond yields can lead to higher borrowing costs for businesses and consumers, which can slow down economic growth. However, if the bond yields are rising due to a strong economic outlook, it could be a sign of healthy economic expansion, which could offset the negative impact of higher borrowing costs.
The Federal Reserve's monetary policy could also be affected by rising bond yields. If the Fed believes that rising bond yields could lead to an economic slowdown, it may adjust its policy by lowering interest rates or increasing its asset purchases to keep borrowing costs low and support economic growth.
In summary, when US government bond yields are on resistance, it could have a significant impact on various aspects of the economy and financial markets. It could result in a temporary decline in the stock market, higher borrowing costs for businesses and consumers, and potential adjustments to the Federal Reserve's monetary policy.
What's next?
๐ The Feds are lots of data to watch out for:
๐ Fed Chair Powell speaks on Tuesday/Wednesday
๐ JOLTs job data on Wednesday
๐ Fed Beige Book on Wednesday
๐ Fedโs Barr speaks on Thursday
๐ February jobs report on Friday
๐ Final week of Q4 earnings
Hopefully, this is a good sign to see a further rebound in the markets and a more dovish Federal Reserve.. unless they are aiming for chaos in which case they intend to raise rates over the 6%
One Love,
The FXPROFESSOR
Big Four: 2023 Macro ConclusionsI begin each year with a macro assessment of what I refer to as the big four markets: Bonds, Equities, Commodities, and the Dollar index. Over the last six weeks we have examined monthly and weekly charts of the big four, and developed our thoughts around how the next year might unfold. Those more detailed pieces are linked below.
Late last year we presented a tutorial on using momentum to visualize the business' cycle from a market perspective (series linked below). We also produced a series covering credit conditions (also linked below).
In this piece, we will combine all the things in an attempt to develop our trading views for the year.
Bond Monthly: While there is still more work to be done to confirm the trend change, I believe the bond trend is finally changing as the world moves from the low inflation backdrop of the last several decades to a more inflationary backdrop. I intend to be a better seller into rallies and bearish technical setups in the weekly/intermediate perspective.
S&P Monthly (Log): In the absence of overtly bearish behaviors and with the primary trendlines intact, I would be hard pressed to conclude that the macro trend has changed. In short, the secular bull remains intact and it should be given at least some of the benefit of the doubt. But my suspicion is that the secular trend is changing and that a primary bear market is unfolding. While still willing to take bullish trades in the daily and weekly perspectives, I am much more interested in opportunities to sell solid technical setups into weekly perspective strength.
Commodities Monthly: I am a better seller of strength and will prioritize bearish setups. This chart continues to support the idea that the business cycle is weakening/topping.
Dollar Index Monthly: The 70.70 - 121.02 trading range has defined the Dollar trade over most of the last 4 decades. Even at the August 2022 high, DXY remained well within this range. Since correcting from the August 2022 high, the market is now in the upper center of this range. Moves inside the bounds of the range are primarily noise and while they present trading opportunities, they mean little in macro terms. If the market does test the top of the broader range, my expectation is that a major shorting opportunity will develop.
Business Cycle Matrix: The matrix is entirely consistent with a weakening business cycle that has yet to trough. Over the last two years rising short and long rates led the cycle lower. Equities, responding to higher rates, turned lower this year and both industrial and agricultural commodities are now weakening as economic demand wanes. The outlier is the Dollar. It has benefited from global flight to quality, carry and the aggressiveness of our central bank verses other central banks. But, of the asset classes, the Dollars relationship to the business cycle is the least consistent.
Rates clearly led this cycle lower and it is likely that they will lead the next cycle higher. It is important to note that short rates have risen more than long rates. This has created the type of highly reliable yield curve inversion that signals a coming recession.
High Yield Option Adjusted Spread - Investment Grade Option Adjusted Spread Monthly: If there is any one thing, other than a collapse in inflation, that would induce a Fed pivot it would be a rapid deterioration in credit conditions. A collapse would show up in this chart (series linked below). A spread moving back into the 500-600 bps area would get the Feds attention and begin to set the stage for a rapid pivot.
Conclusions:
1. The business cycle is likely to weaken over the coming months.
2. The weaker cycle should produce lower equities (earnings will finally begin to deteriorate).
3. A recession should put in a temporary top for bond and note yields.
4. A sharply steeper curve, led by short rates falling more rapidly than long rates, would suggest that the recession was here.
5. A weaker business cycle should produce lower commodities and a lower Dollar.
For myself, I like to have a blueprint of expectations to trade and position around. But it is also important to be flexible. In highly financialized and interlocked economies things change quickly and plans must be adapted to the new situation. I suspect that risk management and flexibility will be needed this year.
Many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technicianโs curriculum.
Good Trading:
Stewart Taylor, CMT
Chartered Market Technician
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.
My Thoughts on Treasury Yields and Why You Should Care5% of on a 1-year US Government Bond Yield?
I never thought that I would see the day.
Many of us have grown up in a low rate world. Today, you buy a US Treasury bond, hold it for a year, and get 5%. That's more than most stocks yield in dividends, probably nearly double or triple the average. However, it's said that the S&P 500 averages 7% a year or so. Nonetheless, factor in recession fears and the trade becomes even more interesting.
What are government bond yields?
A government bond is a debt security issued by a government to raise money. When you buy a government bond, you're effectively lending money to the government in exchange for interest payments. The yield on a government bond is the return you'll receive on your investment, expressed as a percentage. So if a bond has a face value of $1,000 and a yield of 3%, you'll receive $30 per year in interest.
Why are government bond yields rising?
I can list out those reasons for you below:
1. Inflation
2. The Fed is purchasing less Treasuries
3. Economic growth is slowing, which means taxes will be less
What are the major implications?
Opportunity costs.
I'll say it again: Opportunity costs.
Everything that is bought, sold, and/or traded now must be weighed against this 5% yield. Do you want to buy Apple for the next year at its current valuation or take a risk to get 5% on a Treasury bond? You can substitute Apple for anything and everything that comes to mind from construction investments to crypto.
Do I own any bonds?
NO. I missed it and am only now paying attention. Will I potentially add some to my portfolio? 5%? It's possible. That's why I wrote this idea. I want to share my thoughts and add a few of these symbols to my watchlist.
I look forward to reading your comments!
The yield curve scares meThis could be a disaster. The crashes in the past started when the 2y and 10y yields re invert from negative to positive territory. I checked when the bottoms of the indexes came in the past and it was when they re inverted to 2.3%. We are far far away from the bottom if history repeats. This is the only thing that worries me when it comes to crypto. Crypto is no longer isolated from the stock market.