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ZB1! (10 Year T-bonds ) , H4 Bullish continuation Type: Bullish continuation Resistance: 163'18 Support: 157'24 Pivot: 159'16 Preferred case: With price moving above the ichimoku cloud, we have a bias that price will rise from our pivot of 127'25 in line with the 38.2% Fibonacci retracement to our 1st resistance of 129'00 which is also the graphical swing high resistance. Alternative Scenario : Price may dip to the support level of 127'00 in line with 61.8% Fibonacci projection level. Fundamentals: With the uncertainty of the RUSSO-UKRAINE conflict and the implications on the US economy due to increase increase sanctions. Bond prices will continue to increase as increase frequency of rate hikes seems more unlikely. As fundamentals and technicals align, ZB1! might be a good opportunity to look into.
CBOT:ZN1!Long
by Genesiv
2yr & 10yr Bond with M1Nothing to be concerned about here... if you're an ostrich. Inflation spiraling out of control, while bonds reflect the loosest monetary policy possible with a dovish Federal Reserve hand-wringing about tanking the markets. M1 has gone beyond parabolic, practically vertical. The Fed communicated this week that they will try and control future prices but they're not going to do anything to reign in current "transitory" prices. Fed Chair Powell "hopes" history will say the current regime got this under control when replying to Senator Shelby in congressional talks this week... to which Shelby replied their actions to this point indicate otherwise.
TVC:US10Y
by R0MM3LL
US 10-Year Yield PeakThe 10 year yield will not get to 3%. Since 1987 we have seen this downward trend in treasuries indicated by the channels on the chart. As of today, the 2 standard deviation peak is at 2.2% and the 3 standard deviation peak is at 2.9%. In one year it will move down to 2.0% and 2.7% respectively. There's also a chance we already peaked and we don't see a 10 year yield over 2% for the foreseeable future. There has not been a single time since 1985 that we broke out of the 3 standard deviation upper bound. It is safe to say 2.9% is a hard cap on the 10 year without a major meltdown in the US bond market. Even the 2 std. dev. channel has only been broken twice (and only once significantly) since then. I think this will cause huge bond buying whenever it gets above 2.2% and realistically we won't see over 2.5%. Eventually we'll start flirting with the 0% bound and the 2 std. dev trend will dip negative sometime in 2030. Until then, enjoy the roaring 20s.
TVC:US10YLong
by Seth-Goldberg
Bund approaching much tougher resistanceAs traders unsurprisingly head to safe havens, one of the biggest movers has been the bond market, which has seen a vicious rally higher. I am having a look at the bond market this morning. How far will this rally go? This is a tough call to make but given the overhead band of resistance, which the market has reached, my suspicion is that we should at least see a pause here. So, what makes a ‘tough’ area of resistance on a chart? This happens when a number of chart factors converge in the same area – so for the Bund March contract market this morning (N.B. this is about to expire) we have 2 double Fibos at 170.90/96 (61.8% retracement of the move seen this year and the 50% retracement of the move down from August 2021. Directly above here lies the 200-day ma at 171.66 AND another double Fib oar 172.52/69 (the 78.6% retracement of the move seen this year and the 61.8% retracement of the move down from August). In addition, we have a whole host of resistance coming in from price – previous highs and lows. We also have the 55-week ma coming in at 171.54. MY point is – there is a LOT of resistance in this band, and you may like to tighten up stops if you are in it! Disclaimer: The information posted on Trading View is for informative purposes and is not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. Opinions expressed are our current opinions as of the date appearing on Trading View only. All illustrations, forecasts or hypothetical data are for illustrative purposes only. The Society of Technical Analysts Ltd does not make representation that the information provided is appropriate for use in all jurisdictions or by all Investors or other potential Investors. Parties are therefore responsible for compliance with applicable local laws and regulations. The Society of Technical Analysts will not be held liable for any loss or damage resulting directly or indirectly from the use of any information on this site.
EUREX:FGBL1!
by The_STA
Why I think it's a good idea to have some EM exposureEmerging markets have dramatically underperformed the S&P 500 since the launch of the first EM ETF in 1987. However, during that period, there have been stretches of outperformance. In fact, there appears to be a cycle. EM outperformed from 1987 to 1994, underperformed from 1994 to 2000, outperformed from 2000 to 2010, and underperformed from 2010 until the present. I believe we may be nearing the end of the current down cycle, and approaching a period of EM outperformance. I also believe EM is relatively inexpensive compared to the S&P 500, and that yields on both EM equities and EM debt make a good case for EM investing here. And, finally, I believe that there are significant tail risks ahead for the US and Europe, and some diversification is warranted. Analyzing the Cycle If indeed there's a cycle in the relative performance of EM vs. US, how much longer will the current downswing last before the next upswing? The lengths of the last three EM/US cycles were 2192 days, 2464 days, and 3682 days. That's an exponential progression. If the progression continues, the current cycle should be around 4550 days. We're currently at 4110 days. So, we may be nearing the end of the cycle. (But this is by no means an exact science; I just think it's interesting). Analyzing Valuation Let's compare some basic price ratios on an EM ETF and an S&P 500 ETF. This data comes from Fidelity. IEMG P/E: 12.15 P/B: 1.76 P/S: 1.42 P/FCF: 8.63 Dividend Yield: 3.08% SPY P/E: 23.00 P/B: 4.30 P/S: 3.00 P/FCF: 17.22 Dividend Yield: 1.27% So you're paying roughly 2x as much for the S&P 500 as you are for emerging markets. That might make sense if you expect EM economic growth to greatly lag US economic growth, but that isn't really the story that the economic data tell. The US's share of global GDP has stayed approximately the same over the last several decades (~15%), while EM's share of global GDP has increased from approximately 42% in 1996 to about 60% currently. 71% of global GDP growth is in emerging markets, and only 29% is in developed markets. So the data don't support the view that the US economy is growing much faster than EM. Rather, I think US equities have a high premium for a couple reasons. First, US companies have done a really good job of increasing earnings a lot faster than the economy grows. S&P 500 profit margins have steadily grown from about 6% in 1994 to about 14% today. Secondly, interest rates in the US have gradually fallen over the last several decades, and as interest rates fall, stock market multiples expand. (Instead of buying bonds, investors buy stocks when bond rates and yields are low.) However, we may be nearing the end of both of these trends. 0% is probably the floor for nominal interest rates in the US, and corporate profit margins can't expand forever. (I don't know where the ceiling for margins might be, but I suspect that rising margins are related to falling interest rates, so that if rates hit a floor, margins will hit a ceiling.) If multiple and margin expansion in the US start to hit a limit, then the future of multiple expansion and margin expansion will be emerging markets, where rates are still way above zero and can go a lot lower. Plus, EM investors will get paid a much higher dividend yield in the meantime. EM Debt vs. EM Equities Traditionally, US investors have been advised to maintain a 60-40 portfolio-- 60% stocks, 40% bonds. But with real yields on US bonds deeply negative, a lot of US investors have gone to an all-equities allocation. I'd argue that one way to get bond exposure with better yield is to buy EM bonds rather than US bonds. Comparing VWOB vs GOVT is informative. VWOB is an ETF of sovereign EM bonds, and GOVT is an ETF of sovereign US bonds. As you can see, the overall yield-adjusted return on VWOB has been significantly higher since the start of our data in 2013. The distribution yield on VWOB is about 4.52%, and the distribution yield on GOVT is about 1.43%. So you get way more yield on VWOB. The default risk is higher too, of course, which is why VWOB is more volatile than GOVT. Note that there's been a big dip in relative valuation recently. There are a couple reasons for that. First, with inflation high, emerging markets have been raising interest rates and tightening financial conditions a lot faster than developed markets. And second, the Russian invasion of Ukraine raises the risk that both Ukraine and Russia will default on sovereign debt. I don't know where the relative bottom will be, but I've been buying EM debt on the way down. We're heading into a monetary tightening cycle that poses risks to all global asset prices, but since emerging markets are so far ahead of developed markets in the cycle, it's possible that a lot of the tightening is already priced in for EM. Tail Risks One of the reasons that EM equities and bonds are less popular than the US equivalents is that they're seen as being exposed to a lot of tail risk. The Russian invasion of Ukraine is a good example. Autocracy and political instability can lead to bad leadership decisions that tank markets. But I think the US has more political tail risk exposure than we'd like to admit. Our political discourse has been deteriorating for years, with partisanship extremely high, membership in civic organizations extremely low, and voters' policy views increasingly unhinged. Victims of our own success, we're being targeted by highly effective propaganda machines in Russia and China that seek to sow the seeds of political instability. We've also got so much money sloshing around in this country that our political process is being targeted by corporate lobbyists and criminal syndicates as well. It's not a good sign when companies get 10x the return from investing in lobbyists than from investing in R&D. The US still ranks low on measures of corruption, but that's largely because the scales aren't built to estimate the kind of corruption we have in the United States (e.g. "access money"). Consider that the leading presidential candidate for 2024 is under investigation in multiple jurisdictions for financial fraud and is widely suspected of connections to the Russian government, yet there's no real sign of his party even trying to muster a primary challenger. And on the other side, you've got a guy with unprecedented low approval ratings, and his party doesn't seem to be trying to muster a primary challenger either. I don't know how you break the two-party duopoly, but it's increasingly dysfunctional. And all this political dysfunction is arguably parasitic on economic growth. Perhaps even more worrying than political tail risk is climate tail risk. Granted, the US has more resources than other countries that it can deploy to adapt to a changing climate. But it has one big vulnerability that EMs don't have: the North Atlantic current, which is reportedly on the verge of collapse. When the North Atlantic current goes, there will be catastrophic changes in climate for both North America and Europe. The southern hemisphere is less exposed. So, I think southern hemisphere investments make for good diversification to protect against specifically northern hemisphere climate risks.
NYSE:EMFLong
by ChristopherCarrollSmith
1
Bonds Soar off the Russia/Ukraine ConflictBonds have soared as risk off sentiment prevails as the Ukraine conflict intensifies. Russian forces are bearing down on Kyiv, the capital of Ukraine and civilian casualties are mounting. ZN has blasted off from highs at 127'08, through 127'22, and well into the 128 handle. We have cleared 128'01, the first level in the 128's, and have just broken through 128'10. With such a strong bull impulse, it is difficult not to anticipate a pullback or sideways currection at this point. We are likely to at least range at current levels, between 128'01 and 128'11, with a ceiling at 128'24. If not, expect a retracement to 127'22. Worst case, it is certainly possible that we will retrace the entire move to 127'08 (recall that gold did this just last week).
CBOT:ZN1!
by quantguy
Macro market update - Traditional & CryptoHello everyone! In this idea we'll talk about the current macro environment and give updates on the most important markets. Although I am not a political analyst and definitely not an expert on the Russia/Ukraine conflict I need to start from there, as the situation seems to be getting worse by the day. For now, there is no clarity as to what will happen next, even though some sort of agreement/resolution is still possible, probabilities currently seem stacked in favor of a war breaking out. Of course, the impact this would have on markets would be significant and that's something markets are already pricing in. The key issue here is that the markets were already severely stressed due to high inflation (shortages), world economy drowning in debt and all sorts of issues, while bond yields were going higher. Therefore, it isn't just that conflict in isolation, it is the conflict at a time where nothing seems to be going right. Again, I have no idea what will happen or how other countries will try to interfere if Russia invades Ukraine, however there is no way there won't be all sorts of issues, especially around energy markets and especially in Europe. Just the uncertainty around energy prices which could cause another inflation spike, at a time where people are demanding governments and Central banks to do something about inflation, while markets are overvalued and are trending down, is not a good combination. With the current events it looks like the probability of the Fed raising rates by 50 bps in March has come down significantly. It is pretty normal to expect the Fed to not try and push things at this stage and even slow down a bit, as they don't want to spook the markets even more. From now on they can blame the fact that they aren't raising rates on the uncertainty caused by external factors which affect the global economy. The fact is that inflation was set to slow down dramatically in 2022 as demand has been going down, liquidity has been drying up and supply chain issues have eased significantly. Hence the Fed raising rates wouldn’t really do much to slow down inflation and it would be just a political move. At the same time, they know they won't really be able to raise rates above 2-3%, while the market is already indicating that in 2023 they will have to cut rates. The yield curve is already inverting and the 2y10y spread is already at 40bps. Essentially they’ve been trapped and a war would be able to get them out of their hole is a war. Why? Because in my opinion bond yields could fall dramatically as investors try to get into the most safe and liquid instruments, while the government will force the Fed to do anything it can to support it and tell it to forget fighting inflation. In the short term however, we could see a spike in bond yields (2y to 2-2.5% and 10y to 2.5-3%) as the market might initially anticipate higher inflation due to more spending by the government and higher inflation due to higher energy prices. Now the truth is that even though I do expect yields to come back down eventually and resume their long-term downtrend, I could easily be wrong and yields just go up from here. We are at a situation where oil prices could skyrocket and supply chains break down again, while governments trying to print their way out of this hole. At that stage I think the market will want to mostly hold US treasuries as they are the safest and most liquid instruments and it will refuse to create money (banks won’t be willing to lend to anyone other than the government). That would be the point where the market doesn't want to take risks and would be willing to not try and beat inflation. Someone might be now thinking 'well that's crazy, you always have to beat inflation'. Well, that's not always the case and certainly not the case for everyone. At situations like this most people are losing no matter what, as when there are shortages, waste of resources, unnecessary deaths and destruction, there are less winners than usual. Most people are used to living in an environment when the pie is growing, not shrinking... At the same time, it is clear that in the long term the ones that have to lose the most are bond holders, either nominal or real terms, although in the short term they might see tremendous gains once bonds bottom (yields top). The reason behind this is that there is no easy way to get out of this massive debt - low growth environment the global economy is in, without a massive fiat currency devaluation. So let's go through the charts one by one, starting with bonds. It's very clear that we are getting closer and closer to the key resistance. Bonds are at support (yields at resistance), but the strongest support is 6-7% lower (~50 bps). It is unclear what the bond market is signaling for now, but bonds and stocks going lower would a major sign of trouble in the short term. Commodities do look pretty strong, with Gold finally starting to shine, although until we get a close above 1960 we could expect some chop. My view on Gold is that it could get even all the way down to 1350 until it really breaks above 1960, however a breakout looks more and more likely. Oil is also looking pretty strong, even though it might be somewhat overvalued here. It is very clear that there supply of oil is pretty low and barely keeps up with demand, despite the fact that demand has gone down. A war would probably have a massive impact on the market, with Oil potentially making new ATHs in 2022-2023. Like I had mentioned before, the 90-110$ region has a decent amount of resistance, so we could continue to see some chop in that area. Based on the current price action, buying at 75$ would be best potential buy as it would be very hard to see lower prices. 55$ is also possible, but we'd need to see the global economy crash, while a war doesn't happen for it to get down there. Natural gas in Europe seems to have stabilized, and we could see it go down in case there are no sanctions on Russia or because the US starts exporting some of it to Europe. However we are seeing NatGas slowly trying to go higher in the US, and based on the current price action it looks like it will trade above 6.5$ in 2022-2023. The USD is at a weird place as against most developing market currencies it seems to be very strong, but against most developed market currencies weaker than expected. Unfortunately I wasn't able to share a index I created of the USD vs developing markets, but I am able to share an index of the USD vs developed markets, as the DXY isn't the best index out there. Based on it it is clear that the USD is trending higher in the medium term, but it has been going sideways for a very long time and has reached an area of resistance where it could potentially reversed. At the end of the day, there is a need for a weaker dollar and this current set of circumstances could definitely lead into a weaker dollar in the short term. Personally I don't believe that the USD is done, I do believe it has more upside and that it is the strongest currency out there... However I also do see the potential of it going much lower as 1) US prints more than the rest, 2) US rates fall harder than the rest, 3) Everyone tries to get away from the dollar strandard. Stocks aren't in a great place, as the Nasdaq 100 just made a new low and is flirting with its 400 DMA, the S&P 500 retested its lows and the 300 DMA, while the Russell 2000 looks like it just finished its throwback after a massive distribution and could fall another 15-20%. It is currently very clear that stocks are in a short-medium term downtrend, which is very close to turning into a full blow bear market if they continue lower. In my opinion the long term uptrend is intact, and as the market just managed to sweep some major lows and bounce, this could be the bottom. Or at least I should say it has to be it, or I see stocks going down another 10-20% before they full bottom. At the moment the S&P looks the strongest index out of the 3 and could potentially bottom around 3900-4000. This is the first place I'd be looking to buy, even if it is just for a bounce. For Nasdaq it is very unclear to me where the bottom might be, however for the Russell it is very clear that a potential bottom could come in the 1600-1740 zone. Essentially expecting for the 'vaccine' trade to reverse and buy the retest of the 2018-2020 highs. The one chart that is telling me there is more pain coming, is the VIX. Based on the current setup it looks like Volatility is in an uptrend and that there is a need for an explosive move higher before it reverses. It would actually be very odd for it to top here, after slowly going higher. In my previous analyses I talked about how I expect the VIX to get to 48 before it reverses, as given the current circumstances it is impossible for me to imagine that we won't see the market extremely fearful due to major changes in the world. Things aren't all that great and there is a lot of change going on in all sorts of directions, therefore I expect to see some sort of shock before I believe the bottom is in for stocks. Again, it is possible that things might have bottomed here, as we got a dip while the stock market was closed and some major lows have been swept, yet it is very hard to imagine that in 2022 we won't get a major crash, unless the Fed doesn't raise rates, resumes QE and there is no war. Finally, the Crypto market is in a similar state as stocks. The two have been heavily correlated since November and they probably will continue being correlated until we get a major crash. At that point I do see Crypto bottom first and the rally much harder than stocks, as it will benefit the most from an environment of sanctions, high inflation and more money printing. In my opinion, Bitcoin will probably be the one that performs the best over the next few weeks / months, as it is the one that has been going sideways the longest, while it is the safest and most liquid asset in crypto, with the strongest narrative in such an environment (digital gold). BTCUSD has been in a very clear downtrend and the rejection at 46k just confirmed that until we close above all the major moving averages, anything between 20k and 28k is possible. Going lower would be pretty hard and the most likely scenario over the next few weeks / months, is a bottom at 24-25k. Won't go into more detail here as I've done so twice before and I definitely recommend people to read my previous analyses on the crypto market.
COINBASE:BTCUSD
by BitcoinMacro
Bonds Attempt to Establish Value Near LowsBonds have picked up from lows, retracing the vacuum zone back to resistance at 126'19, exactly as we had predicted yesterday. The Kovach OBV picked up very slightly, but nowhere near enough to suggest any serious buying momentum. We are seeing resistance from these levels, as anticipated, confirmed by a red triangle on the KRI. It seems likely that ZN may retrace the range again, and find support at 125'17, but if we continue to test higher levels, then 126'18 and 127'01 are the next targets.
CBOT:ZN1!
by quantguy
Here is why the Us-Dollar stands still! Pump should come soon!Hey tradomaniacs, everything I wanna say is mentioned in the chart. Yields are currently falling due to more demand in Bonds (oversold market) which are attractive for investors who want less volatility. When there is demand in Bondy yields are moving down (negative correlation) which is dragging down the momentum for US-Dollar which should actually move up when equities fall. Wait for yields to pump during the sell-off in stocks and US-Dollar will pump.
TVC:US10YLong
by Trading2ez
The Problem With JapanIn this video we discuss the current macro economic problems facing the Bond market and anticipate that regardless of what happens we will see dislocations (volatility) in a number of different markets. The problems with Japan stems from their monetary policy to implement Yield Curve Control (YCC) where they are committed to keeping their interest rates between +0.25% & -0.25% with the targeted rate as 0%. As global inflation is hitting consumers hard and all over the world central banks move to increase interest rates & lower economic stimulus introduced during COVID-19, Japan's 10Yr Government Bond (JGB) Yield is at the upper limit of their band (currently trading at 0.22%). As the Bank of Japan (BoJ) now steps into the market and buy as many bonds as required for the market to maintain the desired interest rate it could very easily start to drag other global bond yields such as the US 10Yr Bond lower with it... the exact opposite of what central bankers want right now in order to battle inflation. Its situations such as this that historically have meant inflation runs out of control and causes catastrophic impacts on the economies of the world, or the flip side to this situation is that Japan is forced to abandon the current band of YCC and accept the inevitable negative effect this would have on both domestic and global Stock markets. My prediction for how this plays out is that at least for the meantime the global market follows the JGB Yield and starts a correction until this starts to cause real issues for inflation to the extent that central bankers start introducing things such as emergency rate hikes... essentially central bankers may hope they can get away with no increasing rates because they analyse inflation to be "transitory". In this situation I will be looking at the following trades: USDJPY Short Gold Long Nasdaq Long Let me know your own thoughts in the comments below & feel free to share this with any friends.
TVC:US10Y
by JoelWarby
3
US10Y in-depth analysis - Why I think we will see Gold above 2k In this video I am going to show you why I think that we will have a major decreas e in bonds price this year. This is due to the fact that we are currently trading in a wedge shape , or a so-called Elliot Wave Diagonal which is characterized by a 5-Waves-Pattern , of which every inner wave is shorter than the first impulsive wave. Fundamentally spoken, I do assume that rate hiking might already priced in the current Dollar and Bond prices. Therefore FED rate hike announcement might be the catalyst for several sell-off waves. If you liked this analysis, please leave a like a comment and a subscription. Thanks. RT
TVC:US10YShort
0
by RT_Trading_
2
In depth analysis of bond yields & the USD! Macro series pt2Part 2 This is the second part of the macro analysis series. In this part we'll focus on analyzing the current situation around the US bond market and the US dollar, while trying to map out the future depending on how the Fed and the economy move. You can find the rest of the analysis on the links down below. After going in depth about interest rates, the USD, the Fed and the economy, it is time to accompany everything with some charts. In the first chart we have the 2year yields of US government bonds which have been in a downtrend for more than 30 years. Based on technical analysis there is resistance for yields at the 1.3-1.5% zone, as well as 2-2.5%. The fact that we are so close to the first resistance is matching well with the fact that after the first rate hike the Fed might not raise rates again, and rates might actually start falling again. Even if that’s not the case, if the Fed tries to push the narrative that it will raise rates even more, we could see the 2y bond yield go up to 2% and stop there, by respecting the long-term downtrend. That also goes well with the fact that inflation could be potentially coming down and even be below 2% by the end of 2022 or with the fact that at that point markets might start to collapse, forcing the Fed to lower rates again. In the second chart we have the 10year yields of US government bonds, and the downtrend in this one is much cleaner. This one is very close to major resistance already, yet it could climb up to 3-3.5% before it tops. Breaking above the resistance channel doesn’t mean the downtrend is broken until we get a close above 3.5%. It is key to note that both charts are showing major signs of long-term bottoms, which could last for years but until we see these trends break it is early to confirm a reversal. For example, the 10y reclaimed its 2012-2019 lows and is showing some strength, while the 2y has had a perfect round bottom and is currently going up strong. The truth is that their bottoms in March 2020 really look like a proper capitulation bottom, ones that could signal the end of a major downtrend. By looking at the actual price of long-term bonds ($TLT, $UB etc), we can see that they had a proper blow off top. Before we get into our views on bonds though, something we need to clarify for those that don’t know much about bonds, is that bond yields are inversely correlated with the price of bonds, which means that when yields go up, bonds go down and when yields go down, bonds go up. Therefore, the blow off top in bonds could be a major signal that bonds have bottomed for good (yields could be headed higher). To an extend the current drop in bonds could be attributed to the fact that the same way the pendulum swung too much on one side and it is now swinging on the other. This is a pretty reasonable assumption as the bond bull market has been raging for years and in Feb-Mar 2020 it got extremely overbought. Hence shaking out traders who believed and still believe that yields would turn negative soon might have to suffer for a few more months or years before they see their ideas play out, if they ever do. Having said all that is we need to remember that the blow off top was accompanied by some fairly strong actions by the US government and the Fed, in order to save the bond market and the economy, both of which were under immense stress and almost collapsed. Nearly 2 years later and all the support is being withdrawn as the government has cut down its spending, the Fed will raise rates and shrink its balance sheet, and the pandemic seems to be over as Covid has become endemic. These are having notable effects on markets as the 2y yield has been rising faster relative to the 10y and they are now only 60 basis points apart, while in March they were 160 basis points apart. That means that the yield curve has been inverting, which is a major signal that future growth expectations are muted, yet another sign that the Fed might now be able to raise rates much. Essentially the bond market is telling us that there could be some short-term inflationary pressure and growth, but in the long run we won’t have much growth or inflation. Finally, the last key observation is around the Fed doing Quantitative Tightening (QT = shrinking of the balance sheet), which empirically tends to depress long term yields. Usually when the Fed buys bonds, yields go up (when in theory they should go down) and when the Fed sells bonds, yields go down (when in theory they should go up). The reason behind this is that when the Fed buys it creates a risk on environment, so the banks that sold them their bonds go buy other riskier stuff, and when the Fed sells it creates a risk off environment, so the banks that buy the bonds want more bonds. To sum it all up again and put it in a tradeable idea, we could see yields trade higher and higher, and actually peak in March around the time the Fed plans to stop purchasing bonds, a clear buy the rumor sell the news idea. Next chart is the USD Index, or else known as the DXY. I’d like to start by saying that although this isn’t the best way to measure the performance of the USD relative to other currencies, it is the most commonly used one. Just a few days ago the DXY had a major breakout with a lot of strength and it could go higher, despite the fact that we didn’t get immediate continuation. Since 2015 the DXY has essentially been going sideways, and has formed a pattern that looks pretty similar to 2008-2015 period, something someone could call accumulation or in this case re-accumulation. In our opinion the probabilities of the DXY getting to 112-120 first are slightly higher than getting to 80-84, as the short term and long-term trends are bullish, while the medium-term trend is neutral. Of course, it wouldn’t be surprising if it gets to 80-84 to bottom and then go to 112-120 if things get very volatile with Central banks and especially the Fed taking a lot of actions. In case it goes above 105, then the Fed, the US government and other Central banks will seriously have to think of a way to devalue the USD or there is a risk the global economy will face extreme problems. Despite the fact that these problems could be somewhat preventable, taking any sort of action now will probably have a huge political cost. Everyone wants a weaker dollar as most people owe dollars, not own them. The world is short on dollars, banks in and out of the US aren’t really creating many new dollars, the Fed isn’t creating dollars and yet more and more people rely on the dollar as a store of value or as a medium of exchange. Eventually the world needs to get off the ‘dollar standard’, though this is more likely to happen when push comes to shove. Governments and Central banks will eventually find a way to devalue to the dollar and transition to a new system, but they aren’t ready yet and this is more likely to happen after we get another major financial crisis.
TVC:US02Y
by BitcoinMacro
Complete Macro AnalysisHello everybody! This is a follow up on my 6-part traditional and crypto market analysis, yet everyone that reads this one will benefit greatly, regardless of whether they've read any of the previous analyses or not. Over the last week I provided some updates on each part, however it currently makes more sense for me to make a brand-new holistic analysis, rather than provide small updates on each part. This one will be focused entirely on traditional markets, while the next one will be focused entirely on crypto. In order for anyone to have a better idea of where markets might be headed next, it is best to start with the bond market. Bond yields have been rising across the world and across the entire curve, with the big distinction that lower duration bond yields have been rising significantly faster than long term ones. The main reason that this is happening is that bond markets are expecting Central banks to raise rates a few times in the next 1-2 years, but don't believe they can do anything more than that. Essentially the market sees inflation being transitory, that the global economy is in a bad shape and that Central banks are in such a terrible spot, that by the time they raise rates a few times, they will be forced to start cutting them again. Based on the charts below, it is clear that bond yields are still in a massive downtrend. The 10y yields have started hitting resistance, while yesterday we got the first rejection at resistance due to the Russia/Ukraine news. It is pretty normal for people to seek safety at times like this, by buying bonds (bond yields and bonds are inversely correlated). So, as you can see on the third chart, the minute bonds got to support and the news started coming out, the bond market bounced. Although I wish that war between Russia and Ukraine doesn't happen, and actually believe it won't happen, in case that it does happens, the Fed gets some room to not raise rates. For many reasons that I mentioned in the previous analysis, it is clear that inflation will come down significantly in 2022 and there is very little the Fed could do about it anyways. Therefore, any excuse they might be able to use to not raise, they will probably use it. Having said all that, bonds are still in a short to medium term bear market, and could fall another 5-10% before they put in a final bottom (yields going up by 0.5-1% from here). Now the situation between Russia and Ukraine doesn't affect markets just because it affects the psychology of people or because governments print money to cover expenses of war. There are several severe implications around trade and resources, as a lot of trade especially between Europe and Russia could stop, while Russia is a major exporter of commodities, primarily of Oil and Natural Gas. Europe and the entire world were already facing serious problems around energy, and this could make things even worse. Again, for many reasons mentioned in the previous analysis, there isn't enough oil above ground or oil production to cover the needs of the world at reasonable prices. OPEC isn't even able to meet its production increase goals, let alone be able to handle Russia not giving oil to the rest of the world. Oil is already pretty expensive relative to where it should be given the current state of the global economy, and based on the charts it could go significantly higher. So far, the market has behaved as I had expected, with a rise up to 92-93$, a pullback and now another push higher. It's not yet clear if the current situation will boost oil prices above 100$, but it is certainly possible. In the short term it is easy to see a mini 'speculative shock', that could send crude up to 115-120$, only for it to then come all the way down to 75$ and find support there. What is interesting to note is how Gold has been able to hold its ground for so long, despite bond yields going higher. Not only that, but it currently sits above all major moving averages and pivots, while it has also broken above its key diagonal resistance. The truth is that the breakout isn't as decisive as one might have expected based on the news that came out on Friday, hence it might be a trap. It’s clear that the breakout was heavily affected by the the Russia/Ukraine news and that could be the catalyst for a gold bull market, but it’s still prudent to be cautious. What is even more interesting is that Gold has gone up, while most Central banks are raising or plan to raise rates, and while the USD has been going up since early 2021. In my previous analysis, I mentioned how I thought gold going up or down is more like a coin toss, as there is a strong case to be made in either direction. Some people took that as me being bearish on Gold, while what I had said was that above 1930-1940 gold might be tremendous for going long. Personally I prefer to buy strength and simply sacrifice some gains, in order to avoid being stuck in a trade that doesn't do well. A few weeks ago, the ECB hadn't even talked about raising rates, but now they have. Right after the Fed meeting the EURUSD pair had a major reversal that accelerated when the ECB started turning hawkish. My initial thought was to watch Gold closely, as now 3 of the 5 major Central banks are raising or talking about raising rates, yet gold remains strong. At the moment EURUSD has been rejected at resistance with an SFP, yet it still has some room to the upside. It's above the 50 DMA and the diagonal, so if everything goes well and tensions get resolved peacefully, the pair could easily get to 1.15-1.17 by the next Fed meeting. The USD seems to already been losing steam as the yield curve is flattening and there are already 7 rate hikes being priced in. Hence the ‘real’ news isn’t that the Fed will raise rates by 0.25% in an emergency meeting or that it will raise rates by 0.5%, but that the ECB might raise rates after an entire decade, as well as that all Central banks will be forced to cut rates relatively soon. Therefore, this gold strength could also be an indication that many investors are betting on a policy error by Central banks, which might be forced to reverse course faster than people expect. What people need to know, is that gold doesn't behave like most people think it does. Gold in our age, is more like an error/catastrophe hedge, that tends to follow real rates. For example, today Gold could benefit from two things: 1. A war is definitely a big boost for gold, as people might want to own it because it is of limited supply and has no counterparty risk, and it can easily be owned anywhere. Countries that go to war tend to devalue their currency or even seize assets, or that country itself could be excluded from the global financial system, like being kicked out of the SWIFT system. In such a situation gold tends to offer tremendous certainty, while nothing else really does, not even US treasuries. 2. When Central banks are cornered or have no real control over a certain situation. Currently it is obvious that Central banks are trapped, and that there is another major 'catastrophe' lying ahead. The world is stuck in an environment of low growth and too much debt, with markets being significantly overleveraged. None of the problems over the last 20-30 years have been solved, only papered over, hoping that the system magically heals, with the last 13 years alone being full of examples of them always acting late. Finally, the key reasons why gold hasn't done well during a situation of deeply negative interest rates, is that 1. Gold had rallied significantly since 2018, 2. There were lots of different, more compelling opportunities out there, 3. Everyone was already prepared (nobody else to buy + people had to sell gold as inflation increased to covered other costs, essentially using their insurance), 4. Most of the inflation wasn't caused by the Fed / Central bank actions. After having gone through all of the above, it is definitely time to talk about stocks. Once again I’ll focus on the top 3 US indices, SPX, NDX and RUT, as they can give us a pretty good idea of where stocks are headed globally. In my previous analysis I mentioned how I expected a bounce, a dip and then another bounce, which all pretty much played out based on my technical analysis, with one exception. The last move up was shorter than initially expected, however even based on my tools I was probably 'too optimistic'. Starting with the S&P 500, we can see how the bullish channel was broken and significant downside followed. Then the market had a strong bounce off the 300 DMA + horizontal support. After the bounce it got rejected on the 100 DMA + diagonal resistance + horizontal resistance, and fell down to the 200 DMA where it bounced. What is odd to me is that the bounce ended with a double top, rather than getting up to the 50 DMA and test the diagonal, while forming an SFP. A double top there is somewhat bullish in the short term, as it is an area that the market will probably break before making new lows. At the moment the market is sitting right at the Yearly Pivot but has broken below the 200 DMA, a situation that is neither very bullish or bearish. As a whole the momentum is indeed pointing lower and this isn't a great picture. In turn the Nasdaq 100 is actually looking much worse than the S&P 500, as a lot of the big tech behemoths have been taking several big hits recently. Slow growth, higher inflation and higher interest rates, are definitely not beneficial for these companies. For example, we saw a massive gap down for Facebook after a disappointing earnings report, a gap similar to what happened in June 2018, with the NDX going down 19% from that point in the next 6 months. Tech stocks have massively outperformed everything else since 2009, and pretty much everything compared to where they were in Feb 2020, so it is normal to get some extra weakness in this index. At the same time several parts of the stock market started peaking throughout 2021, with mid Feb 2021 being a major inflection point. At that time many unprofitable tech related companies had reached bubble territory and started reversing, but the effects of their valuation getting crushed started having an impact on NDX three months ago. The third index and final index is the Russell 2000, which looks like it was in distribution for about 10 months, while a few days ago it had a throw back into resistance. The RUT had a really strong breakout in Nov 2020 and by March 2021 it was up 35%. Then in September it formed a clear bull trap that led to the major leg down. Once the 2100 support that was tested multiple times for about a year was broken, it became clear that more downside would soon follow. At the time of my previous analysis, I mentioned that we'd probably see the Russell retest that support and flip it into resistance, which happened as expected. Now the index is below all major moving averages and Pivots, and is still looking bearish, even though in the short term it has shown a decent amount of strength. Until it reclaims 2250, it remains in bearish territory and it is probably best to avoid going long, Based on all the above, things overall aren't looking great. At least not in the short to medium term, for the economy and the stock market. Central banks are trapped and most investors are aware of that, and now there is an extra variable, that of the conflict. So the question then becomes, if everyone is aware of all of this, couldn't the market simply go up from here? Aren't lots of these things priced in? Aren't wars said to be good for the stock market? Well, like I mentioned above all of these are correct. It is true that due to the conflict we might see bond yields roll over and we get more stimulus from central banks and governments, both of which could push stocks higher. However, in the short term there is a lot of uncertainty due to the way many things will get disrupted in the world. Because of that gold and oil could go ballistic, hence they are the best bets at the moment. It is probably best to stay away from stocks for now, as their potential downside is substantial, while their potential upside is limited as they need some time to recover. Nothing in the charts really suggest that they are ready to go up hard any time soon. Let's also not forget that stocks would have eventually deflated to an extend, regardless of what the Fed or what happens in the world, as the 2020-2021 frenzy couldn't last forever. Of course this doesn't mean that I believe a major bear market is in play right now, just that the SPX could eventually get to 3900-4000 in the next year, that the NDX will test its major log diagonal and that the RUT will its 2018 highs. Although I don't know how or when we get there, to me the most likely scenario is that within the next 2 years bond yields will collapse and the government will be forced to spend a lot, while the Fed is forced to cut rates and do QE. Even if the yields don't collapse and inflation goes rampant, the US government will still be forced to print and spend a lot, something that would make the problems worse. In conclusion, despite the fact that I was mostly bullish on stocks and oil through 2020-2021 and neutral-bearish on gold, my stance now remains bullish on oil (buying dips anywhere from 55-75$), neutral-bullish on gold and neutral-bearish on stocks. For me to turn bullish on stocks again, I'd either need to see certain levels get to the downside or reclaim certain levels to the upside, or some extreme action by central banks or governments. In terms of US bonds and the US Dollar, the picture is not as clear. In early 2021 I was bearish on bonds, but after that I was bullish as I didn't really expect the Fed to raise rates and thought bonds were significantly oversold. Even if I wasn't expecting the Fed to raise rates, the USD was also extremely oversold and none of the issues of the financial system had been solved. The world was still short on dollars, what the Fed and the government did was too little and at the same time everyone printed. In the current environment, on the one hand bonds are in major downtrend and the USD is in a major uptrend, and on the other hand both might have reversed after hitting major inflection points. Hence it is probably better to either go with the trend or simply wait a bit until the market gives us a clearer picture as to where it wants to go next. Thanks a lot for reading and good luck with your trading! :)
FX:NAS100Education
by BitcoinMacro
10-Year Treasury Yield All Set for Summer 2019 Highs?Following another strong US CPI report, the 10-year Treasury yield surged above 2%, further pushing above peaks from late 2019 (1.9073 - 1.9718). That has exposed peaks from summer 2019 as key resistance (2.1779 - 2.1431). A bullish Golden Cross remains in play between the 20- and 50-day Simple Moving Averages. Keep a close eye on RSI, negative divergence shows fading upside momentum. A turn lower may see the SMAs act as support, maintaining the dominant upside focus. TVC:US10Y
TVC:US10Y
by QM_Dubrovsky