US10Y-US02Y Yields Are Steepening NOW
Updated
Ahead of incredibly important CPI data to be released tomorrow, we are seeing yields steepen in a very dramatic fashion. In comparison to each of the last 3 inversions, this one is not even close to the past.
It is important to understand that when yields steepen, it systematically leads to downside in the SPX/NASDAQ. It has been the indicator of almost every recession since 1980.
Now we can't jump to conclusions just yet, we can only try to anticipate what comes next.
Tomorrow key CPI data gets released which is why markets are selling off in the face of it. This data will be the reason for the next move up or down.
Focusing back on the chart, we can see just how far yields have deviated from the 200MA. In comparison to the past, this is the farthest divergence on record.
IF yields were to retest that 200MA, it would almost certainly lead the markets down a very dark path rather quickly.
We are seeing a clear momentum gain on the RSI to match this.
Now let's take a look at the previous two inversions not shown in the chart; (2000, 2008)
First, take note of where the 200MA is here in comparison to now. Second, notice when yields are Steepening the SPX is falling. They have an inverse correlation.
Take a look at how extended the NASDAQ is still;
The same can be said about the SPX;
There are very significant moves being made in the markets at this moment, and it will take absolute diligence to ensure survivability if the markets take us down a dark path ahead.
For now, pay attention to the data tomorrow. If it is optimistic, we could see some short-term relief. If it is worse than anticipated, watch CLOSELY! The projected CPI tomorrow is 8.4%.
That's your best case going into tomorrow (April 12th). Use it as a measure.
It is important to understand that when yields steepen, it systematically leads to downside in the SPX/NASDAQ. It has been the indicator of almost every recession since 1980.
Now we can't jump to conclusions just yet, we can only try to anticipate what comes next.
Tomorrow key CPI data gets released which is why markets are selling off in the face of it. This data will be the reason for the next move up or down.
Focusing back on the chart, we can see just how far yields have deviated from the 200MA. In comparison to the past, this is the farthest divergence on record.
IF yields were to retest that 200MA, it would almost certainly lead the markets down a very dark path rather quickly.
We are seeing a clear momentum gain on the RSI to match this.
Now let's take a look at the previous two inversions not shown in the chart; (2000, 2008)
First, take note of where the 200MA is here in comparison to now. Second, notice when yields are Steepening the SPX is falling. They have an inverse correlation.
Take a look at how extended the NASDAQ is still;
The same can be said about the SPX;
There are very significant moves being made in the markets at this moment, and it will take absolute diligence to ensure survivability if the markets take us down a dark path ahead.
For now, pay attention to the data tomorrow. If it is optimistic, we could see some short-term relief. If it is worse than anticipated, watch CLOSELY! The projected CPI tomorrow is 8.4%.
That's your best case going into tomorrow (April 12th). Use it as a measure.
Note
The accuracy on this chart is pretty remarkable
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