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Macro Monday 13~Purchase Managers IndexMacro Monday 13 ISM Purchasing Managers Index The ISM Purchasers Managers Index (PMI) measures month over month change in economic activity within the manufacturing sector. The PMI is a survey-based indicator that is compiled and released each month by the Institute for Supply Management (ISM). The survey is sent to senior executives at more than 400 companies in 19 primary industries, which are weighted by their contribution to U.S. Gross Domestic Product (GDP). A PMI above 50 represents an expansion in manufacturing when compared with the previous month. A PMI reading under 50 represents a contraction while a reading at 50 indicates no change. The further away from 50, the greater the level of change. According to Investopedia "ISM data is considered to be a leading indicator of economic trends. Not only does the ISM Manufacturing Index report information on the prior two months, it outlines long-term trends that have been building over time based on prevailing economic conditions". The ISM reports are released on the first business day of each month for the month that has previously closed. Thus, they are some of the earliest indicators of current economic activity that investors and business leaders get regularly. Something to look out for next Monday 2nd October 2023. The PMI focuses mainly on the five major survey areas; 1. Employment (20%) 2. New orders (30%) Covered in Macro Monday 6 3. Production/Output (25%) 4. Inventory levels (10%) 5. Supplier deliveries (15%) We covered the ISM New Orders Index in Macro Monday 6 as it is the largest component of the Purchaser Managers Index making up 30% of the overall index. I will leave a link to the chart. The Chart The chart outlines the last 12 recessions (shaded red zones) with the PMI readings over the same period. As we are already aware above 50 on the PMI reading is expansionary and below 50 is contractionary (red thick line). Three Main Findings 1. In 11 out of 12 recessions a PMI reading at or below 42 was established. This means if the PMI falls to 42 there is a 92% probability of a recession. At present we have not reached that level, we are currently at 47.6. 2. The PMI has bottomed 10 out of 12 times in Quarter 1 (between Jan – March) with the remaining two bottoms happening in Quarter 2 (both in May). This means that 83% of the time the PMI cycle appears to bottom in Quarter 1 with the most bottoms in January (6) with Feb(2) and May(2) in close second place. - It’s worth noting that the bottom of the PMI cycle may not be the bottom of a stock market cycle. If we are forward looking then a rising PMI is positive for the economy and markets but ideally a move above 50 is the true signal of economic expansion from a manufacturing standpoint. 3. The average PMI bottom to bottom cycle timeframe over the past 6 cycles is 58 months with the shortest being 37 months and the longest being 86 months. We are currently at month 38 and the average month of 58 is Jan 2025 with the max of 86 months being May 2027. - How interesting is it that both these potential PMI bottom dates line up with our two most frequent PMI bottom months indicated in point 2 (January and May). - Interestingly according to U.S. government research, since WWII the business cycle in America takes, on average, around 5.5 years which closely aligns with our 58 month (or roughly 5 year) indication for the PMI chart. The business cycle incorporates an aggregate of economic data such as the ISM data, GDP and income/employment metrics. We might cover the business cycle in more detail on a future Macro Monday. The ISM New Orders Index (30% of the PMI) Similar to the ISM New Orders Index Chart (covered in Macro Monday 6) which makes up 30% of the PMI, we have not reached below the 42 level on this chart either which has provided a 100% confirmation of recession when we have had a definitive move below the 42 level historically. For ISM New Orders if we stay below a sub 50 level on the ISM New Orders Chart for greater than 7 months it has resulted in a recession every time except for 1966 and 1995 (8 out of 10 times). We are currently 14 months below the 50 level which is unprecedented, with the new orders index nudging a little lower on the August reading from 47.3 down to 46.8. ISM Data Release 2nd October 2023 When we receive our next ISM Data release next Monday 2nd October 2023 we can refer back to the PMI chart and the New Orders Index Chart and see how things have progressed and if we have reached and critical levels. These charts and the others I have completed on Macro Mondays are all designed so that you can revisit them at any point and press play on TradingView and see if we are breaking new into higher or lower risk territory. I hope they all help towards your investing and trading decisions. Have a great Monday guys, Lets get after it! PUKA
ECONOMICS:USBCOI
by PukaCharts
4
NAS100 - EMBARKING ON THE BIGGEST BULLRUN IN HISTORY? Hello Traders, what a week it has been! So I think it is justified to provide you with everything I know and show you how I see things. On the chart you’ll notice an image. The image shows theoretical price action with a parabolic curve step-like formation, representing an idealised pattern in price action trading. The formation begins with Base 1, where the stock starts to show an uptrend, followed by Base 2, indicating continued growth and increased investor interest. Base 3, marked by an "X", signals a critical entry point for traders, as it suggests potential for the stock to double in value rapidly. We are depicted to be at this third phase, which is considered the most opportune moment for entry before the final ascent. Base 4 represents the peak of the trend, culminating in a Sell Point where the stock reaches its maximum and sharply declines, thus completing the pattern. However, as we gear up for the CPI data release on the 13th of February, be aware that it might steer us into a broad consolidation phase. The market's parabolic trend may not be sustainable given the upcoming figures. Prudence is key here—anticipate potential stabilisation or sideways price action as the market digests the CPI results. Additionally, watch out for how price reacts to the BOS level. No structure is definite and it's important to adapt to what price is showing us and not to cling to an idea that no longer is valid. NAS100 Weekly NAS100 Daily To add to this NAS100 analysis, I think it’s important to discuss its main components. The "Magnificent Seven" Big Tech stocks, including Nvidia, Apple, and Amazon, have seen varied performance since the pandemic, challenging the notion of them as a homogenous group. The dispersion in their returns and diverse business models highlight the differences within the sector. While Nvidia thrives as an AI specialist and Apple boasts defensive qualities, Amazon combines retail with cloud computing. The sector's valuation spectrum reflects a mix of growth prospects and market expectations, suggesting a nuanced investment landscape rather than a uniform "bubble." This diversity raises questions about the future performance of growth versus value stocks within these leading tech companies. Apple's revenue grew during the holiday quarter, driven by iPhone sales and a record in services, despite a drop in China sales due to competition and geopolitical issues. The company faces regulatory scrutiny and a patent dispute, but remains optimistic about its product ecosystem and upcoming launches like the Vision Pro headset. Amazon's stock surged 7.9% following a report of strong holiday sales, boosting its market value by approximately $135bn. CEO Andy Jassy highlighted the company's future focus on AI, projecting AI revenues to reach "tens of billions," further driving optimism for its growth potential. Alphabet's shares dropped after advertising revenues missed expectations, despite integrating its Gemini AI into various services. The company plans significant investments in AI infrastructure, raising investor concerns about the balance between growth and expenditure in the generative AI race. Meta's shares soared over 20% after announcing a first-ever dividend and a $50bn increase in share buybacks, signalling recovery from a recent advertising slump. The company plans more investment in AI and the metaverse, despite expecting short-term AI products not to significantly drive 2024 revenue. Full-year expenses are projected to rise notably. Nvidia's dominance in the AI chip market, essential for technologies like OpenAi's ChatGPT, has driven its significant growth, with the stock more than doubling in value over the past year. This surge contrasts with the broader semiconductor industry's struggles with excess inventory and reduced demand in other sectors. Nvidia's success is partly due to partnerships with major tech firms like Microsoft and Meta, with the latter planning to acquire almost 600,000 high-end Nvidia GPUs for AI research. This focused investment in AI has positioned Nvidia at the forefront of the data centre market, overshadowing traditional leaders like Intel. Microsoft's shares fluctuate after announcing strong cloud sales integrated with OpenAI's tech, but ended lower due to concerns over high investments in AI infrastructure. Despite a 20% increase in cloud revenues, investors remain cautious about the costs associated with expanding AI capabilities. Tesla's shares dropped 12% amid warnings of lower sales growth due to reduced demand and increased competition. CEO Elon Musk announced a new lower-cost car for 2025, aiming to regain momentum. Tesla faces challenges from price cuts, higher costs, and a shift in the EV market, impacting its financial performance. Here’s some economic theory for you, to add some more depth to the analysis. The Federal Reserve's monetary policy, particularly changes in the federal funds rate, has a significant impact on bond yields and, subsequently, stock prices. When the Fed raises interest rates to combat inflation or cool down an overheating economy, bond yields tend to rise as well. Higher bond yields make bonds more attractive relative to stocks, which can lead to a decline in stock prices as investors may shift away from equities. Conversely, when the Fed lowers interest rates to stimulate economic growth, bond yields often decrease, making stocks more appealing, which can boost stock prices. So, Fed rate decisions play a crucial role in influencing the relationship between bond yields and stock prices. In economic theory, bond yields and stock prices exhibit a negative correlation. This is why yield charts matter. Have a look: The general outlook is that the US Federal Reserve is cautious about cutting rates despite inflation slowing, due to concerns about potential economic growth and inflation resurgence. Market expectations of rate cuts exceed the Fed's projections, but with inflation drivers easing, the case for reducing rates is growing stronger. However, the US job market added 353,000 jobs in January, surpassing the expected 180,000, leading to reduced expectations for a Federal Reserve interest rate cut in March. The strong job growth supports the Fed's cautious stance on rate cuts, despite political pressures. In my opinion, if the US economy continues to show such resilience and the next CPI release is lower than consensus, we might be witnessing the beginning of the largest bull run in history. In summary, the NAS100's trajectory is at a crossroads with the upcoming CPI data potentially triggering market consolidation, despite the recent parabolic pattern. The diverse performance among Big Tech stocks underscores the need for nuanced analysis. While Federal Reserve policies continue to sway bond yields and stock prices, the strong job market suggests caution in anticipating rate cuts. Keep a close eye on how the NAS100 responds to the interplay of inflation data and tech sector dynamics. Overall, maintain a strategic approach and be ready to adjust to new information as we navigate these complex market conditions. Stay informed, stay agile. As always, I hope you enjoyed this one and have a great weekend!! ;)
FX:NAS100Long
by Lexi_Is_Trading
Macro Monday 31 ~ Dallas Fed Manufacturing Index (Key Levels)Macro Monday 31 U.S. Dallas Fed Manufacturing Index This Index is compiled from a monthly survey conducted by the Federal Reserve Bank of Dallas to assess the health of manufacturing activity in the state of Texas. It provides insight into factors such as production, employment, orders, and prices, offering a snapshot of economic conditions in the region. Why is the Dallas Fed Manufacturing Index Important? ▫️ As stated above the index covers manufacturing activity in the state of Texas, the state of Texas ranks 2nd only to California in factory production & comes in at 1st as an exporter of manufactured goods, thus Texas is an important state for gauging manufacturing & production in the U.S. economy. ▫️ Texas also contributes an incredible c.10% towards the U.S. Manufacturing gross domestic product making the index an important metric to consider towards potential GDP trends in the U.S. ▫️ The Dallas Fed Manufacturing Index (DFMI) is one of several regional manufacturing surveys that feed into the national Purchasing Managers Index (PMI). The PMI is released later this week on Thursday 1st Feb thus the DFMI on Monday will give us an early indication of the potential direction of the PMI later in the week. FYI, I will be covering the PMI for you on Thursday so stay tuned for that. How to read the index? A reading above 0 indicates an expansion of the factory activity compared to the previous month; below 0 represents a contraction; while 0 indicates no change. The Chart The chart only dates back to 2005 so we have a limited dataset however we can still see definitive levels of importance and trends over this shorter historic backdrop. A few findings from the chart: The + 36.8 Level Since December 2005 any time we have hit the +36.8 level on the chart it has typically represented a peak in manufacturing and production signaling that a decline would likely follow. This has occurred 3 times and each time within 20 – 23 months of this +36.8 peak we had a recession or a financial crisis. 1) December 2005 21 Months later we had the Great Financial Crisis. 2) June 2018 20 months later we had the COVID-19 Crash. 3) April 2021 23 months later the U.S Banking Crisis occurred in March 2023 resulting in 3 small to mid size banks failing. - The remaining banks being saved by the Bank Term Funding Program (BTFP) which appears to have successfully contained the contagion for now. The BTFP is ceasing in March 2024 👀 ▫️ We can see above that in the event we reach the +36.8 level in the future, history informs us that within 20 – 23 months major economic issues will likely present. If we had known this back in April 2022. After April 2022 the S&P500 fell 15% to its recent lows. ▫️ The National Bureau of Economic Research (NBER) could declare the current period we are in as a soft recession. For the last six recessions, on average, the announcement of when a recession started was declared 8 months after the fact meaning we will would only get confirmation of a recession once we are 6 - 8 months into it. Its worth noting that some recessions were confirmed by the NBER after the recession was over. - 36.8 Level A reading below the -36.8 level has historically confirmed a recession. We have not hit this level since the COVID-19 Crash with May 2020 being the last time we have been at this level. Periods in Contractionary Territory There have been 2 previous periods where we have remained in contractionary territory for greater than 6 months. These are worth reviewing as we have been in contractionary territory for the 20 months now (April 2022 - Present). 1) Sept 2007 – Nov 2009: We fell into contractionary territory during the Great Financial Crisis for 26 months. From 2009 to 2016 the index seemed week oscillating around the 0 level and not really breaking out into persistent expansionary territory until 2017 forward. 2) Jan 2015 – Oct 2016: We fell into contractionary territory for 21 months however there was no recession. 3) Apr 2022 – Present: We are currently on month 20 of contraction. Now this could be just like point 2 above whereby we recover to expansionary territory in month 21 or 22 (Jan - Feb 2024) however if we do not, we are moving towards a timeline similar to point 1 which was the 26 month Great Financial Crisis. Q1 of 2024 will be very revealing in terms of what we can expect next. In the event we end up in contraction for 26 months or if we hit the -36.8 level we can presume, based on history, that we likely have a recession on our hands. And, if we recover into expansionary territory maybe we have got away with it this time 🙂 You can clearly see that the Dallas Fed Manufacturing Index is significant for assessing the U.S. economy because it provides timely insights into the health of one of the nation's key economic sectors: manufacturing & production. Since Texas is a major hub for manufacturing activity, trends observed in the Dallas Fed index can offer valuable indications of broader economic trends. It is one of several regional indices that contributes to a comprehensive understanding of the manufacturing landscape, aiding policymakers, investors such as ourselves, and businesses in making informed decisions about the state of the economy. The current economic environment just gets more and more interesting every week Thanks for coming along again folks 🫡 PUKA
ECONOMICS:USDFMI
by PukaCharts
Why Now is the Time to Go Long on USD/JPYThe trade idea capitalizes on the economic strengths of the US and the challenges faced by Japan, making a long position on USD/JPY appealing. Amidst the contrasting economic landscapes of the US and Japan, a long position on USD/JPY appears favorable. The robust and resilient US economy, marked by strong retail sales, positive jobless claims, and optimistic consumer sentiment, positions the USD on solid ground. In contrast, Japan faces challenges with contracting Manufacturing PMI, easing CPI, and external factors like weakened Chinese data impacting its economic outlook. US Economic Strength: Federal Reserve maintaining interest rates reflects a strong and resilient economy. December retail sales surged, indicating consumer confidence. Positive jobless claims and robust performance in ISM Manufacturing PMI and Retail Sales further strengthen the USD. JPY Economic Challenges: BOJ maintains expected monetary policy; Governor Ueda expresses openness to easing. Stable Unemployment Rate, but Manufacturing PMI contracts while Services PMI shows resilience. Japanese wage data falls below expectations, impacting BOJ's policy decisions. Weakening Chinese data adds complexities to Japan's economic scenario. Trade Strategy: Long Position on USD/JPY: Consider initiating a long position on the USD/JPY currency pair. Entry Point: Look for technical signals indicating potential upward momentum. Stop-Loss: Place below recent significant support to manage downside risks. Take-Profit: Target the next resistance level, considering the positive momentum in the US economy.
Long
by Elite_Forex
2
Understanding Initial Jobless Claims as a Market IndicatorIntroduction In the complex and multifaceted world of economic indicators, initial jobless claims hold a special place. As a measure of the number of individuals filing for unemployment benefits for the first time, this statistic offers a real-time glimpse into the health of the labor market, which in turn is a vital component of the overall economic landscape. This article delves into how initial jobless claims function as an indicator and their impact on the financial markets. Understanding Initial Jobless Claims Initial jobless claims refer to claims filed by individuals seeking to receive unemployment benefits after losing their job. These are reported weekly by the U.S. Department of Labor, providing a timely snapshot of labor market conditions. A lower number of claims typically signifies a strong job market, suggesting that fewer people are losing their jobs. Conversely, an increase in claims can indicate a weakening labor market, often a precursor to broader economic downturns. Initial Jobless Claims as an Economic Indicator Health of the Labor Market: The primary significance of initial jobless claims is its reflection of the labor market's health. A steady, low number of claims often correlates with job growth and declining unemployment rates, indicating a robust economy. Leading Indicator for the Economy: As a leading economic indicator, jobless claims can provide early signals about the direction of the economy. Spikes in claims can forewarn of economic contraction, while consistent decreases might indicate economic expansion. Consumer Spending: Since employment directly affects consumer income, initial jobless claims can also indirectly signal changes in consumer spending, a major driver of economic growth. Impact on Financial Markets Market Sentiment: Traders and investors closely watch initial jobless claims to gauge market sentiment. Fluctuations in these numbers can lead to immediate reactions in the stock, bond, and forex markets. Monetary Policy Implications: Central banks, like the Federal Reserve, consider labor market conditions when setting monetary policy. Rising jobless claims can lead to a more dovish policy stance (like lowering interest rates), while decreasing claims might justify tightening policies. Sector-Specific Implications: Certain sectors are more sensitive to changes in jobless claims. For instance, a rise in claims can negatively impact consumer discretionary stocks but might be favorable for defensive sectors like utilities or healthcare. Analyzing the Data Understanding initial jobless claims requires context. Seasonal factors, temporary layoffs, and unique economic events (like a pandemic) can skew data. Analysts often look at the four-week moving average to smooth out weekly volatilities for a clearer trend. Conclusion In conclusion, initial jobless claims serve as a crucial barometer for the economy and financial markets. Investors, policy makers, and economists alike monitor these figures for insights into labor market trends and the broader economic picture. As with any indicator, it's essential to consider jobless claims in conjunction with other data to fully understand the economic landscape.
ECONOMICS:USIJCEducation
by AlgoAlpha
Comparative Analysis of US and UK EconomiesDear Traders, I would like to offer my perspective on the major economic drivers for USD and GBP. Like the famous investor John Bogle says, "The market may be crazy, but it's not entirely insane. Fundamentals matter." This analysis compares key economic indicators of both countries in order to explore potential impacts on the GBP/USD currency pair in the long term. Examining GDP, growth rates, interest rates, inflation, jobless rates, government finances, external balances, and population dynamics displayed above, I intend to provide insights into the relative strengths and challenges of each economy. ECONOMIC PERSPECTIVE USD exhibits a larger GDP and higher growth rate , implying a more robust economy. They both have similar interest rates, but USD's higher growth puts it in a position of advantage. INFLATION, JOBLESS RATE, AND GOV. FINANCES GBP faces higher inflation, which affects it purchasing power against USD. Both nations show low jobless rates; the UK maintains a lower debt-to-GDP ratio (good for GBP). EXTERNAL BALANCES AND POPULATION DYNAMICS Both countries have current account deficits, but the UK's larger deficit may affect its currency negatively. USD represents a significantly larger population, influencing economic scale. MY TAKE Understanding the economic dynamics of USD and GBP is crucial for interpreting potential influences on the GBP/USD pair in the long term. From the economic data and analysis presented above, it is evident that USD shows economic strength , while GBP shows stability . In the light of this, I expect a stronger USD (DXY) in the coming weeks or months. The currency pair may see fluctuations as institutions assess these strengths and challenges, but my bias on the GBPUSD pair is BEARISH. A break below 1.2451 will likely send the pair to 1.2207 price region or even lower.
Short
by Samuel124
3
SPX Ready for crash or relief ? Short Term BullishMarket Analysis: The S&P 500 (SPX) is currently exhibiting a Cup & Handle pattern, a classic technical analysis pattern often associated with potential bullish reversals. However, there are indications of a slowdown in the pattern formation, suggesting that the completion of the pattern may take some time. Key Observations: Bull Trap Warning: There is a cautionary note regarding the possibility of a Bull Trap at resistance. Traders should be vigilant and consider the potential for a false breakout that could lead to a reversal. Double Top Scenario: It's advised not to discard the probability of the Cup & Handle pattern transforming into a Double Top. This implies the potential for a bearish reversal if the pattern fails to complete as expected. Anticipation of Further Bullish Momentum: Despite the noted cautions, there is an anticipation of further bullish momentum leading up to the resistance line. This suggests that, even with the potential challenges in pattern completion, there may be opportunities for bullish trades. Forecast: Given the current analysis, it's prudent for traders to closely monitor price movements within the Cup & Handle pattern. The resistance level should be watched carefully for signs of a Bull Trap or a potential transformation into a Double Top. Traders may consider taking a cautious approach, using stop-loss orders, and staying informed about market developments. For more in-depth analysis and real-time updates, it's recommended to refer to reliable financial news sources and consult with financial professionals. Always conduct your own research and analysis before making any trading decisions, and be aware of the risks involved in financial markets. Please note that the provided forecast is based on the given context and should not be considered as financial advice. Market conditions can change rapidly, and it's crucial to stay informed and adapt to the evolving market dynamics.
SP:SPX
by wikitrades
Why Burry Bet Against the US MarketBurry has frequently expressed his views on Twitter (X), asserting that the market has not made a genuine recovery and is headed for a recession. He believes it's just a matter of time before we witness the ultimate impact. Many individuals consider Burry to be an extreme pessimist, contending that he consistently focuses on the negative aspects. However, in the lead-up to the 2008 market crash, people also criticized him for being overly pessimistic and opposed his ideas. The purpose of this post is to delve into his perspectives and examine some recent information I've been investigating in order to determine whether the market situation is indeed in line with his claims Who is Michael Burry? Michael Burry is a renowned American investor and former hedge fund manager. He gained widespread recognition for accurately predicting the 2008 financial crisis and profiting from it through his hedge fund, Scion Capital. Burry is also known for his contrarian investment style and is a proponent of value investing. His story is prominently featured in Michael Lewis's book, "The Big Short.” Today, we will examine data that reveals the current state of the American market. Through this data, we will learn to understand the reasons behind why the market may be weaker than it appears, despite all the hype and the notion that the American market has "recovered.” What’s Burry Concerns Economic Concerns: Despite positive stock market performance and GDP projections, Burry, along with other notable investors like Warren Buffett, sees potential issues in the global economy. Federal Reserve Actions: Burry and others believe this situation is unsustainable and may lead to economic stagnation next year, characterized by weak growth, rising inflation, and labor shortages. 1. Michael Burry said is Velocity is nominal GDP/Money Supply (M2 here). QT + higher rates starting to use M2 down. Yet we are seeing a tick up in velocity, emerging from narrative obscurity, In 1978-79, rising velocity trumped failing money supply to drive inflation higher and higher redux would shock Full Explanation: "Velocity" is like the speed at which money moves in the economy. Imagine money as a car. The car's speed (velocity) is how fast it's moving. "Nominal GDP" is the total value of goods and services produced in the economy. "M2" is a measure of the money supply, including things like cash, checking accounts, and savings accounts. Now, let's break it down: If the economy's car (money) is moving faster (velocity), it can boost economic growth (Nominal GDP). "QT" means Quantitative Tightening, which is when the central bank reduces the amount of money in the economy. "Higher rates" means they raise interest rates. When you reduce the amount of money (QT) and raise interest rates, the car (money) slows down (Velocity decreases). When you reduce the amount of money (QT) and raise interest rates, the car (money) slows down (Velocity decreases). Recently, we've seen the car (Velocity) speeding up, even though the central bank has been reducing money (QT) and increasing interest rates. In the late 1970s (1978-79), a similar thing happened. The car's speed (Velocity) became more important than the amount of money (Money Supply) in driving up prices (inflation). "Redux" means a repeat of something. So, the statement suggests that if we see a repeat of the 1978-79 situation, it would be surprising and could lead to higher inflation. In simple terms, it's like saying that even though the central bank is trying to slow down the economy by reducing money and raising interest rates, we're still seeing fast economic growth. This reminds us of a situation in the late 1970s when fast economic growth led to higher prices. If this happens again, it would be surprising and could cause inflation. 2.The second thing Burry believes is that there is a bubble in the housing market, similar to the one in 2008. Instructions chat above green (rising market) yellow (small drop market) Red (absolute bear market) He believes that housing prices are over inflated and that many homeowners are still carrying significant levels of debt he is warned that a housing market downturn could trigger a wave of default that would Ripple through the banking system and The Wider economy finally bury has expressed concern about the vulnerability of the banking system which he believes is over leveraged and under-capitalized he has warned that a wave of bank failures could trigger a major crisis similar to the 2008 financial crisis overall buries prediction that another major financial crisis is on the horizon. Explanation for chart above As you can see from the chart , we are not yet showing strong signs of a collapse like in 2008. However, there is a chain of signs that it is beginning to slow down and approach a potential downturn. When a higher time frame displays characteristics in yellow between red, there is a chance of an impending collapse. For now, we must treat this information as neutral and avoid letting our biases guide us. 3.The Third thing is Burry concern about the current state of the stock market. Instructions chat above green (rising market) yellow (small drop market) Red (absolute bear market) Bury has expressed concern about the current state of the stock market, the housing market, and the banking system, all of which he believes are overvalued and vulnerable to a major downturn. Burry has also expressed concern about the high levels of debt in the U.S. economy, which he believes are unsustainable and could trigger a major crisis. He has pointed to the rising levels of corporate and government debt, as well as the growing number of (companies that can only service their debt but not pay it down), as evidence of this. Burry has also expressed concern about the current state of the stock market, which he believes is again overvalued and driven by speculation rather than fundamentals. Explanation for chart above As you can see in the chart, the market has not yet fully recovered despite the recent increases in the S&P 500 and NASDAQ. It's evident that the rally is weak compared to previous years. This analysis indicates a temporary market weakening, with no strong signs of a full recovery at the moment Let's now take a deeper dive into less visible yet crucial information. We'll focus on areas that require understanding their unusual aspects and the reasons behind them. What do I mean? To uncover something unusual, patience and extensive economic research are required. Through this process, we can discover intriguing insights that provide valuable context to the economic situation in the USA. For example, let's examine: a. M2 - MONEY SUPPLY In the graph, you'll notice something that hasn't occurred since 1963. With the help of a tool, we can observe periods of increase (green) and slight decrease (yellow), but no instances of absolute decrease (red). What does this signify? What's the context behind it? After conducting research, I found an explanation. I'm referring to: Financial Stress and Banking Issues: A sharp decline in M2 may indicate underlying financial stress or problems within the banking and financial sector. This is a significant reason as it highlights potential vulnerabilities in the financial system, which could have broader implications for the economy. It might prompt regulators and policymakers to address these issues to prevent a more severe crisis. Do you still find this unremarkable? Remember, this is just one perspective on the situation. b. Unemployment Rate It is crucial to examine the Unemployment Rate, and I've specifically focused on the Unemployment Rate in California. This is because, in the end, the fundamental Unemployment Rate tends to converge to a similar outcome. Currently, in the graph, we observe the color white, which indicates the start of an uptick in unemployment, representing slow growth. White denotes a slow growth momentum or a potentially deceptive rally. Therefore, it's important to note that we have not yet reached the green phase, which signifies a definite increase in the Unemployment Rate. Historically, every time the Unemployment Rate has turned green, it has been followed by an economic downturn. it is essential to remain vigilant. If the Unemployment Rate continues to rise steadily, it may lead to economic stress. On the other hand, if M2 money supply is shrinking or experiencing volatility while the Unemployment Rate is increasing, it points to economic stress and potential issues. A declining money supply reflects reduced liquidity, making it harder for businesses to access capital for growth and causing financial stress. Simultaneously, a rising Unemployment Rate indicates that more people are struggling to secure jobs, further straining the economy. This situation can result in reduced consumer spending, decreased investment, and heightened economic uncertainty, potentially contributing to a market downturn or recession. c. Gold Investors Currently, there's something intriguing happening among certain investors worldwide. Over the past few months, some investors have been stockpiling gold. Since March 2023, gold has displayed a (green) signal, indicating a bullish trend. This suggests that people have been accumulating gold from March until now, similar to the trend seen in 2003. It's possible that some investors perceive the market as risky and view gold as a safety net. However, it's important to note that there can be instances of deception, as seen in 2016 and 2017 when gold turned green but didn't perform significantly and even dropped by 10 percent on three occasions. Such situations occur periodically and not consistently. For instance, investors also purchased gold from 2019 until the end of 2021 (despite the significant impact of COVID-19 starting in 2020), indicating that some investors can spot signs ahead of time. There are more examples from the past. Hence, it's fascinating to closely monitor recent developments in the gold market to see if it can break records or experiences setbacks like in 2016-2017. There are many more examples, but I will stop here. The purpose of this post is to emphasize that thinking outside the box is often more fruitful. Instead of sticking to a linear approach, gather as much information as possible, seek connections between two factors, then three, and continue to cross-reference vast datasets. By effectively cross-referencing, we enhance our ability to assess probabilities and reduce uncertainty. This reflects my personal viewpoint. I observe that the market has reached a plateau in the SP500, NASDAQ, and most markets. There is a possibility that this is a temporary phase, or it may indicate an impending decline. My focus is on monitoring real-time data and responding accordingly, rather than attempting to predict the future. Whenever I perceive the market as (red), I take action. Likewise, when I see it as (green), I take action. Ultimately, my goal is to remain adaptable and respond to prevailing market conditions. In the future, I will continue to provide updates in the event of shifts in market conditions, inflation, new data, and additional information. This will contribute to assembling a comprehensive puzzle that offers clarity on the overall situation.
SP:SPX
by BlackMammoth
1
SPY breaking below down trend on heavy volume shelfSPY is breaching below a short-term daily downward trend at a significantly investor-interested zone. The dark gold region represents a highly trafficked zone of interest during the greater part of the first of the year. After a rather short testing period around mid-May, the market drove higher before return to a short-term downtrend. Now breaking below that trend (orange line), investors are faced with a choice to support the levels of earlier this year, or flee to safety.
AMEX:SPY
by acappy99
$GOLD -Where to Next! (TP1 Hit / ~16.000 Pips) *Game-PlanTVC:GOLD On the previous Quarterly Idea released as a macro/investor POV for TVC:GOLD , a *3M(monthly) area was given as an entry point in terms of market structure. We received a great entry on a Quarterly Level *3M. Salute to everyone of you who took action upon it. Sure did the members of bingX copy-trade community. " Where 2 Next for TVC:GOLD !? " -Fundamentally speaking, safe-heaven assets the likes of Bonds TVC:US10Y , MIL:BTC and TVC:GOLD have sky-rocketed recently and they are on a very desirable highlight right now. So did Crude Oil ICEEUR:BRN1! due to 'WAR' break-out from Israeli Occupiers towards the People of Palestine. The on-going 'WAR' or better said, Ethnic Cleansing, must be observed on the following week(s) to come. Upcoming week (the last week of October) is packed with GDP Q3/2023 reports from various countries, (US,EURO-ZONE,UNITED KINGDOM, GERMANY, ITALY) - TA speaking, a pull back in TVC:GOLD in terms of price action to S/R resistance + Recent Demand area would be very beneficial for uptrend resumption, in order for the TVC:GOLD market to test buyers and sellers . This level should hold, otherwise Changing Character at 1.910$ would suggest price to behave on a more steeper fashion , headed on lower areas at 'alternative SL trail' *D Level or even down further South. This scenario would invalidate the recent uptrend of 10%+ in 10 days on $GOLD. *** NOTE This is not Financial Advice ! Please do your own research with your own diligence and consult your own Financial Advisor before partaking on any trading activity with your hard earned money based solely on this Idea. Ideas being released are published for my own trading speculation and journaling needed to be clear on different asset classes price action.
TVC:GOLD
by Mr_J__fx
Safeguard Your Investments Against Impending CrisesI write to you with a sense of concern and urgency regarding the current state of global financial markets. As an astute investor, it is crucial to stay ahead of potential crises that could significantly impact your portfolio. In light of this, I would like to draw your attention to two potential scenarios that demand our immediate attention: hyperinflation and a financial crisis. 1. Long Gold for Hyperinflation 2. Long BTC for Financial Crisis To aid you in making informed investment decisions, I encourage you to calculate the probability of which crisis will hit first. By assessing the likelihood of hyperinflation versus a financial crisis, you can better allocate your resources and tailor your investment strategy accordingly. Consider consulting with your financial advisor or utilizing online tools to analyze historical data, economic indicators, and global trends. This exercise will empower you to make more informed decisions and protect your investments against potential market downturns. Remember, the key to successful investing lies in proactive decision-making and staying ahead of the curve. By taking action now and diversifying your portfolio with long gold and long BTC positions, you can position yourself to weather any storm that may lie ahead. In conclusion, I urge you to carefully evaluate the potential risks posed by hyperinflation and a financial crisis. Do not let complacency hinder your ability to protect your investments and secure your financial future. Act now, calculate the probability of each crisis, and make the necessary adjustments to your portfolio. If you require any further information or assistance in navigating these challenging times, please do not hesitate to comment away below. Together, we can navigate these uncertain waters and emerge stronger. Wishing you continued success and financial well-being.
BITSTAMP:BTCUSDEducation
by bryandowningqln
AUD/JPY: A CURRENCY PAIR IN THE SPOTLIGHTKey fundamental factors to watch for in the AUD/JPY currency pair: Australian economic data: The AUD is sensitive to data releases such as GDP growth, unemployment rate, and retail sales. Positive economic data releases tend to boost the AUD, while negative data releases tend to weigh on the currency. Japanese economic data: The JPY is sensitive to data releases such as GDP growth, industrial production, and inflation. Positive economic data releases tend to weigh on the JPY, while negative data releases tend to boost the currency. Risk sentiment: The AUD/JPY currency pair is sensitive to risk sentiment in the global market. When risk sentiment is strong, the AUD tends to rise against the JPY. When risk sentiment is weak, the JPY tends to rise against the AUD. Interest rate expectations: The AUD/JPY currency pair is sensitive to shifts in interest rate expectations between Australia and Japan. If interest rates are expected to rise in Australia relative to Japan, the AUD tends to rise against the JPY. Technical Analysis 30-Minute Chart The AUD/JPY currency pair is currently trading in a bullish trend on the 30-minute chart. The price is above the 50 and 200-period moving averages, and the MACD indicator is above the signal line. The RSI indicator is also above 50, which indicates that the pair is not overbought. According to the Elliot Wave Theory, on the 30min chart, we are now forming a Wave C on the downside. If the analysis is valid, the marked levels (or around them) will be touched and then the downtrend will continue for a short-medium term, before the market resumes its uptrend, forming a next impulsive wave on the upside. Key technical levels to watch on the 30-minute chart: Support: 95.059, 95.132, 95.173 Resistance: 95.246, 95.278, 95.351 4-Hour Chart The AUD/JPY currency pair is also trading in a bullish trend on the 4-hour chart. The price is above the 50 and 200-period moving averages, and the MACD indicator is above the signal line. The RSI indicator is also above 50, which indicates that the pair is not overbought. Key technical levels to watch on the 4-hour chart: Support: 95.059, 95.132, 95.173 Resistance: 95.246, 95.278, 95.351 Daily Chart The AUD/JPY currency pair is trading in a neutral trend on the daily chart. The price is between the 50 and 200-period moving averages, and the MACD indicator is crossing above the signal line. The RSI indicator is also at 50, which indicates that the pair is neither overbought nor oversold. Key technical levels to watch on the daily chart: Support: 95.059, 94.958, 94.857 Resistance: 95.246, 95.351, 95.456 Overall Outlook The AUD/JPY currency pair is currently trading in a bullish trend on the 30-minute and 4-hour charts. However, the pair is trading in a neutral trend on the daily chart. Bullish traders will be looking for a break above the 95.246 resistance level on the 30-minute and 4-hour charts. A break above this level could lead to a further rally towards the 95.351 resistance level. Bearish traders will be looking for a break below the 95.059 support level on the 30-minute and 4-hour charts. A break below this level could lead to a further decline towards the 94.958 support level. **Traders should also pay attention to the overall risk sentiment in the global market. I hope this post is helpful. This analysis represents the information at the date it is posted. This analysis does not represent professional and/or financial advice. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content found on this profile before making any decisions based on such information. Any feedback is encouraged and appreciated. Thank you and have a nice day
Short
by YExplore
EUR/USD Weekly Demand ZoneFollowing the previous analysis, the Euro has activated Sell Short positions by reacting to the specified QM level and then decreased to the weekly demand area. Now, considering the engulfing of the Major SR line and the formation of the FTR area, there is a possibility of a trading range between this area and the weekly demand area. Due to the price being placed on the weekly support, if you see a valid setup, you can enter mid-term long positions. 📌 Note that the EUR/USD has broken its upward trend line in daily time frame, and if the price stabilizes below this trend line, we can witness its decline.
by SardarLo
📈MY TAKE ON THE FED, INFLATION AND CREDIT📊 TLDR: I think the price increase we are seeing is not inflation, the economy is going from bad to worse and the FED's actions don't make any sense. At the peak of the great inflation of the 70s in USA while both long and short term interest rates were going up together with inflation, so was the aggregate credit. In fact loans to businesses were growing faster than inflation. Whereas now, while the short term rates are going up the aggregate credit is going down. Businesses aren’t borrowing and the banks aren’t lending. And as it was established by Milton Friedman, inflation is exclusively a MONETARY phenomenon. Therefore price increase followed by unchanged or decreased aggregate credit in not inflation. Which is exactly what we are seeing right now. It might be attributed to the ongoing effects of the Covid era supply shock which created long lasting bottlenecks, the war in Ukraine or some other fundamental systemic economic problem but it’s not conventional inflation which means that raising interest rates will do nothing but further damage the already weak economy (which is reflected in the unprecedented drop in demand for credit) So, the further rate hikes that were hinted yesterday by the FED don’t make any sense and we should be expecting a fast race to the zero with more QE when the economic sh*t hits the political fan. But, let’s wait and see.
OANDA:XAUUSDShort
by TopTradingSignals
4
$DJT: Dow Jones Transportation Average Not Confirming The RunIf you wanted to know whether or not the market was on a bull run or not, all you had to do was look at the Dow Jones Transportation Average or even AMEX:RSP (which definitely does not fit the bull market, showing that overall the S&P 500 has barely broken 15% gain since October). More important though is the transportation average breaking off from the rally ahead of the rest of the market. When transportation is leading us lower this is not a good sign for the economy. Other economic indicators support this thesis. For example, cardboard box demand is the lowest it's been since 2008. Showing signs of a decline in goods demand. For more insights on trading and investing check out the Equity Channel Podcast on Apple, Spotify and Amazon.
DJ:DJTShort
by D1Finance
Gold fell to $1955 after Fed MintuesFed Minutes at midnight on Thursday and Fed member's speech deliver a hawkish stance. This hawkish stance may be considering raising interest rates or tightening monetary policy with other tools this next half year to pressure the high inflation and cool down the inflation down to a target rate of 2%. This can lead to a stronger US dollar and higher yields on US Treasury bonds continuously, making gold less attractive as a store of value and investment option. On Thursday European trading session, the gold failed to break out $1,985 and went down to continue its downtrend, testing the May 23 lowest price of $1,955. Suppose the gold price breakout $1955; the next target would be $1,948 and $1,944 (Red zone). However, the US dollar and the US Treasury yield could soften if the US GDP and PCE data are lower than expected on Friday, and gold price would rebound. Therefore, the resistance may target $1,969 and $1973 in the short run (Blue zone).
OANDA:XAUUSD
by ATFX_Global
Economic Fundamentals: Methodology, Activity, and ResourcesIn our second ever blog in our economics masterclass, we will be going over the extremely basic yet important basics of the markets. Today we will be going over Economic Methodology, The Nature and Purpose of Economic Activity and Economic Resources. Economic methodology Now Economics is a social science, it seeks to understand how individuals, businesses, and societies make choices and allocate resources to fulfil their needs and wants. As a social science, economics analyses human behaviour and interactions in the context of economic systems. Economists need to make assumptions in their analysis, often relying on the ceteris paribus principle. where it assume that other factors remain constant, allowing economists to build models based on real-life scenarios. It is also crucial to distinguish between positive and normative statements in economics. Positive statements are objective and can be tested with factual evidence. They are facts and contain words like will or is Normative statements are subjective and based on opinions. these judgments can influence economic decision-making and policy, leading to different conclusions from the same data. They often contain words like should, would or could. Phew, all the boring stuff done! 😅 Now onto the slightly more interesting stuff 1.2 The nature and purpose of economic activity In economics there is the golden rule, as humans we have unlimited needs and limited resourced The purpose of economic activity is to produce goods and services that effectively allocating resources to satisfy consumer needs and wants. which involves using scarce resources (inputs in the form of the factors of production) to produce desired outputs. Economists face decisions about what to produce, how to produce it efficiently, and who will benefit from the goods and services produced. Careful consideration is given to factors such as opportunity cost, distribution, costs, and productivity to ensure optimal decision-making, all of which we will go through in the future. Section 4.1.1.3: Economic Resources Economic resources encompass the following factors of production: land, labour, capital, and enterprise. Capital refers to physical goods used in production, while entrepreneurship (enterprise) involves managerial abilities and taking risks. Land represents natural resources, and labour refers to the workforce. These resources are rewarded through incentives such as interest, profit, rent, and wages. It's important to recognize that the environment itself is a scarce resource, comprising renewable and non-renewable resources. Proper management and sustainable practices are essential to maintain resource availability for future generations. 3 short yet boring lessons, In my opinion the section we are doing now (4.1 Individuals, firms, markets and market failure) is probably the most boring of them all. Please let me know in the comments how you found my first lesson! In the next one we will be going through Scarcity, choice and the allocation of resources and Production possibility diagrams, which will be slightly more interesting. I will also show a progress bar at the bottom of our posts. Happy Trading! Microeconomics 4.1 Individuals, firms, markets and market failure 4.1.1.1 Economic methodology ✅ 4.1.1.2 The nature and purpose of economic activity ✅ 4.1.1.3 Economic resources ✅ 4.1.1.4 Scarcity, choice and the allocation of resources ⭕ 4.1.1.5 Production possibility diagrams ⭕ 4.1.2 Individual economic decision making 4.1.2.1 Consumer behaviour ⭕ 4.1.2.2 Imperfect information ⭕ 4.1.2.3 Aspects of behavioural economic theory ⭕ 4.1.2.4 Behavioural economics and economic policy ⭕ 4.1.3 Price determination in a competitive market 4.1.3.1 The determinants of the demand for goods and services ⭕ 4.1.3.2 Price, income and cross elasticities of demand ⭕ 4.1.3.3 The determinants of the supply of goods and service ⭕ 4.1.3.4 Price elasticity of supply ⭕ 4.1.3.5 The determination of equilibrium market prices ⭕ 4.1.3.6 The interrelationship between markets ⭕ 4.1.4 Production, costs and revenue 4.1.4.1 Production and productivity ⭕ 4.1.4.2 Specialisation, division of labour and exchange ⭕ 4.1.4.3 The law of diminishing returns and returns to scale ⭕ 4.1.4.4 Costs of production ⭕ 4.1.4.5 Economies and diseconomies of scale ⭕ 4.1.4.6 Marginal, average and total revenue ⭕ 4.1.4.7 Profit ⭕ 4.1.4.8 Technological change ⭕ 4.1.5 Perfect competition, imperfectly competitive markets and monopoly 4.1.5.1 Market structures ⭕ 4.1.5.2 The objectives of firms ⭕ 4.1.5.3 Perfect competition ⭕ 4.1.5.4 Monopolistic competition ⭕ 4.1.5.5 Oligopoly ⭕ 4.1.5.6 Monopoly and monopoly power ⭕ 4.1.5.7 Price discrimination ⭕ 4.1.5.8 The dynamics of competition and competitive market processes ⭕ 4.1.5.8 The dynamics of competition and competitive market processes ⭕ 4.1.5.10 Market structure, static efficiency, dynamic efficiency and resource allocation ⭕ 4.1.5.11 Consumer and producer surplus ⭕ 4.1.6 The labour market 4.1.6.1 The demand for labour, marginal productivity theory ⭕ 4.1.6.2 Influences upon the supply of labour to different markets ⭕ 4.1.6.3 The determination of relative wage rates and levels of employment in perfectly competitive labour markets ⭕ 4.1.6.4 The determination of relative wage rates and levels of employment in imperfectly competitive labour markets ⭕ 4.1.6.5 The Influence of trade unions in determining wages and levels of employment ⭕ 4.1.6.6 The National Minimum Wage ⭕ 4.1.6.7 Discrimination in the labour market ⭕ 4.1.7 The distribution of income and wealth: poverty and inequality 4.1.7.1 The distribution of income and wealth ⭕ 4.1.7.2 The problem of poverty ⭕ 4.1.7.3 Government policies to alleviate poverty and to influence the distribution of income and wealth ⭕ 4.1.8 The market mechanism, market failure and government intervention 4.1.8.1 How markets and prices allocate resources ⭕ 4.1.8.2 The meaning of market failure ⭕ 4.1.8.3 Public goods, private goods and quasi-public goods ⭕ 4.1.8.4 Positive and negative externalities in consumption and production ⭕ 4.1.8.5 Merit and demerit goods ⭕ 4.1.8.6 Market imperfections ⭕ 4.1.8.7 Competition policy ⭕ 4.1.8.8 Public ownership, privatization, regulation and deregulation of markets ⭕ 4.1.8.9 Government intervention in markets ⭕ 4.1.8.10 Government failure ⭕ Macroeconomics 4.2.1 The measurement of macroeconomic performance 4.2.1.1 The objectives of government economic policy ⭕ 4.2.1.2 Macroeconomic indicators ⭕ 4.2.1.3 Uses of index numbers ⭕ 4.2.1.4 Uses of national income data ⭕ 4.2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts 4.2.2.1 The circular flow of income ⭕ 4.2.2.2 Aggregate demand and aggregate supply analysis ⭕ 4.2.2.3 The determinants of aggregate demand ⭕ 4.2.2.4 Aggregate demand and the level of economic activity ⭕ 4.2.2.5 Determinants of short-run aggregate supply ⭕ 4.2.2.6 Determinants of long-run aggregate supply ⭕ 4.2.3 Economic performance 4.2.3.1 Economic growth and the economic cycle ⭕ 4.2.3.2 Employment and unemployment ⭕ 4.2.3.3 Inflation and deflation ⭕ 4.2.3.4 Possible conflicts between macroeconomic policy objectives ⭕ 4.2.4 Financial markets and monetary policy ⭕ 4.2.4.1 The structure of financial markets and financial assets ⭕ 4.2.4.2 Commercial banks and investment banks ⭕ 4.2.4.3 Central banks and monetary policy ⭕ 4.2.4.4 The regulation of the financial system ⭕ 4.2.5 Fiscal policy and supply-side policies 4.2.5.1 Fiscal policy ⭕ 4.2.5.2 Supply-side policies ⭕ 4.2.6.1 Globalisation ⭕ 4.2.6.2 Trade ⭕ 4.2.6.3 The balance of payments ⭕ 4.2.6.4 Exchange rate systems ⭕ 4.2.6.5 Economic growth and development ⭕
NASDAQ:TSLAEducation
by CosmosTradingGroup
1
💵THE WORLD IN DEBT💵 ☑️The fact that the whole world is in massive Debt that can not be repaid is a buzzphrase that was around for like 20 years already. 20 years passed and nothing bad has happened, so what to worry about? In fact an entire political and economic movement called MMT or a modern monetary theory emerged claiming that government debt does not matter and that we can, you guessed it, print as much as we need(kinda) ☑️But the size of the debt itself was never really and issue so long as the government or a big company could service the debts. That is if their cashflow was positive enough to cover the interest payments on the debt. Now however, as the FED is raising rates, this is an issue. ☑️And its not the USA who’s pile of debt we need to be worried about(they are borrowing in the currency they can print themselves, remember?) but rather the rest of the world and the companies. The majority of developing countries don’t have the internal capital required for development, so they need to borrow on the international financial markets in Dollars. And these counties are now facing a perfect storm of a higher cost of new borrowings in Dollars, lower revenues from foreign trade due to recession(and yes we are in a recession, Wake up) and the massive energy and food costs due to the war in Ukraine and the problems caused by the supply chain crisis. ☑️Most big public companies aren’t doing great either. The share of listed companies with the debt servicing costs higher than the profits is now more than 25% and if we exclude the accounting and financial engineering shenanigans, it is save to say that this share is close to 30%. ☑️So the third of the economy is outright insolvent. Multiple countries will either default soon or will at least be plunge into civil and economic unrest and go the way of Sri-Lanka, Pakistan and others… And Jerome Powell said that he aint stopping and that the Fed funds rate should go up by at least 2 percentage points more. So instead of the collapse of the USA, we are likely to see a chain reaction debt crisis In the rest of the world unless the FED changes its mind… I Hope you guys learned something new today✅ Wish you all Best Of Luck👍 😇And may the odds be always in your favor😇 Dear followers, let me know, what topic interests you for new educational posts? explanation
INDEX:BTCUSDEducation
by SignalProvider
4
Macroeconomics for Crypto.Why bitcoin does not go with the S&P?This is research is to figure out where and when to look for the bottom of bitcoin. More importantly when to get out of it if we have a bull run. This may be something new to you, but macroeconomics is crucial here. And this I will try to explain it. The main hypothesis is that the cryptocurrency market has become highly institutionalized, the guys from Wall Street came here. They don't know how to trade from the level, unfortunately, but they know how to do macro sentiment - and Bitcoin became part of their portfolios and now trades the same way as the stock market. Bitcoin has all but lost its independence when Wall Street the weekend trading volumes and volatility is very low almost nothing happens. In 2018 guys like Fidelity came into cryptocurrencies. In 2020 they invited their rich clients and it was a turning point, since then all major banks and funds have been sending their clients compilations with analytics on cryptocurrencies This is an example from UBS bank It's not what we're used to seeing in Tradinvgview or on Twitter, but it's nothing complicated My opinion is that, the connection between cryptocurrency and stock market will only increase, so I urge all traders and investors to pay attention to the way Wall Street analyses work. Their job is to constantly monitor the analysis of the two economic cycles: business cycle and stock market cycles This is a schematic representation, the cycles are unsynchronized. The stock market is a reflection and result of the expectations of traders as to what is happening or will happen in the business cycle Business cycle scheme Everything starts with a reduction in interest rates by the central banks or with an increase in government spending, loans and mortgages become cheaper, the housing sector grows first - houses are built, more resources and materials are spent, the economy comes to life. People buy homes, make repairs, buy appliances, furniture, buy cars, have children, pets. They multiply their consumption, buy a second TV in the living room, subscribe to netflix, go to barbershops and beauty salons - the manufacturing and service sectors grow, unemployment falls, household incomes and corporations grow, and prices rise with them. Consumption peaks - inflation becomes dangerous - the Central Bank raises interest rates - credit and mortgages become more expensive - the housing sector collapses followed by the manufacturing and service sectors, unemployment rises, household and corporate incomes fall, consumption slows, inflation slows down. Sometimes there is a recession, the central bank lowers interest rates - the cycle is closed 😀 This year, almost all central banks in developed emerging markets are raising interest rates. Fact - 50% of all macro analysis will come down to assessing the likelihood of interest rate increases or decreases. Obviously there is money, there is growth and vice versa there is no money, no growth. We're about here in the middle of the cycle, a global recession is likely ahead All this is necessary and important to understand in order to assess the prospects and dynamics of stock prices on the stock market. We are used to the fact that there are many companies whose shares are traded on the stock exchange, and the companies themselves are divided into sectors and industries for classification. The first to react to the expectation of economic recovery are the sectors of financial housing and transport and so on. The logic was described above - mortgage, Home, Car, Kids, TV, netflix subscription and barbershop, etc. Wall Street looks at the stock market a little differently, through factors, that is, properties of certain groups of stocks, for example: industry sectors are commonly divided into cyclical - these are goods services secondary necessities that are highly dependent on the business cycle and non-cyclical - that is, these are goods services primary necessities that are not so highly dependent on it. The first - will respond cyclical, the factors are hundreds, but I will tell you with the most important and understandable. Imagine we take all the stocks and sort them by properties, by volatility, by beta, by dividend yield, by business margins, by multiples and so on so by these factors the stocks are sorted into a whole group. The first factor I consider is the volatility factor aka beta imagine an index of unprofitable junk companies like Virgin Galactic and other meme stocks this will be the extreme manifestation of the beta factor and the riskiness of the idea in Ark innovation by Cathie Wood - it consists of just that. The Quality factor is dividends, blue chips, s&p 500 index, Dow Jones is about them. The Value factor is the value of perpetually undervalued companies with low multipliers, the core of the real economy, they also have their own index, Russell 2000 Growth factor - Growth stocks are companies with prospects of perpetual revenue growth Apple Tesla uber is them And the nasdaq 100 is their index The Size factor is about capitalization small, medium, large, huge The institutional manager's view on the composition of the portfolio is approximately as follows: there are two modes of money and no money. When all is well, money is worthless, cash is trash. The manager buys into his portfolio everything that has high risk and high profitability, high-risk assets: IPO, SMall Cap, venture capital, cryptocurrencies, etc. When the regime is like now, when money is expensive and everybody needs it, the riskiest part is sold first, and further down the chain the portfolio increases the share of cash and bonds from the shares. Here's how these factors look within the stock market cycle. High-risk cyclical small-cap stocks are the first to respond to rate cuts and economic recovery. Next come value stocks, then quality stocks, then growth stocks. Eventually the party ends for everyone and everything goes down, risk OFF mode kicks in. Finally, Bitcoin's connection to the stock market Next you will see the result of a manual correlation search with thousands of stocks of different factors and other asset classes. I will show just a few : the orange line is what we are comparing to, the blue line is the bitcoin scale logarithmic. correlation coefficient on the right - peak correlation and current correlation look only at the visual picture First s&p 500 index is a quality factor peak correlation 88 current 68. Large Cap, Quality, Low Beta For example Coca Cola - Correlation is negative. Nasdaq 100 factor Grow stock growth peaks correlation 86 current 72 is little is the Russell 2000 Value Factor Index And in it most of the small and mid-cap companies from the real economy cyclical sectors in the Peak correlation 93 now 79 The transport industry index in Peak is 95 current 82 Bank index 94 peaks 30 now If Bitcoin were a stock it would be an asset: Value, Cyclical, Small Cap, High Beta, High Risk asset. Stock - value, cyclical sector, small capitalization, high beta and high risk Its place in the cycle starts from where all cyclical industries like transportation, small capitalization companies with the value factor before the recession Here's what the dynamics of the various stocks look like depending on the macro regime actually this is the main chart look at top Bitcoin next comes the SP500 below the Russell 2000 index and the nasdaq 100 From the covid bottom After the rate cuts, everything went up - it's understandable high risk and loss assets rose the most. But of the indices, it was the Russell 2000 that showed the most growth February 2021 marked the vertical lines , inflation expectations hinted that things would be very bad and the entire high-risk segment of the portfolios began to close. the highbets and High Risk were the first to go under the knife. The Russell 2000 stayed basically the same as Bitcoin for a whole year, but it moved stronger. And the Nasdaq 100 and s&p 500 continued their movement. This January's response is the second vertical line turned risk OFF for all assets and the party is over. Bottom line Bitcoin doesn't go for the nasdaq it doesn't go for the s&p 500 goes with the Rassell 2000 index and high-risk assets as part of someone else's portfolios. So we have already seen a new bull run early and it will quickly start and quickly end we should try to be ready for it and not wait for miracles. I really want to remind you that bitcoin's bottom and peak is not a price or a date - it doesn't work that way. It is a period of macro regime change from risk on to risk off and back I have a plan for How to watch and how to act. Thank you very much for your attention. I wish you success in trading and learning the macro, I am sure you will find it very useful . I would also like to thank Anton Klevtsov for the information Best regards EXCAVO
BITSTAMP:BTCUSD
by EXCAVO
47