EuroDollar Futures CurveThe EuroDollar futures market is pricing in rate hikes as seen by the upward slope on the left, but the peak of the curve (contracts which expire in June and September of 2023) suggests that investors believe rates will reach their high and then go down after that and keep going down well into the foreseeable future.
This is an ominous sign that the Federal Reserve, and likely central banks all over the world, will be forced to abandon their current monetary policy tightening cycles and go back to near zero or zero rates once again (and likely quantitative easing of an unprecedented magnitude as well. $200B per month in treasuries?).
Bottom line, the downward slope in yield marks the approximate time of the next recession, according to the bets that are currently on the table. As always, anything can happen and opinions can change.
Buy the dip < Sell the rip
Federalreserve
US Inflation is 8.4% For March. How Does This Affect Crypto?Many are bracing for "ugly" numbers for inflation in the United States in this week's Consumer Price Index report - as high as 8.4%.
Inflation was, of course, the result of the US Treasury having printed record amounts of money in recent years - highly accelerated in the last few years due to COVID spending; further made worse by lockdown procedures that caused disruptions in the supply chain that inflated prices even further.
White House officials are attempting to peg it to Putin's action against Ukraine but that's only a small part of the picture and may not make a difference as consumers and voters start to feel inflation pressures directly in their day to day lives. As poll numbers and approval ratings continue to turn against the incumbency a tones of desperation can be seen in the way the current administration talks about economic issues at hand. (Massive upsets in political races are already happening and is expected to continue into Nov 22' and beyond.)
In the short-term, both crypto and stock markets (including Russia's MOEX) has taken a downturn after the news of high inflation numbers began to hit. Fears of inflation have spooked off part of the investor community - however, being that Bitcoin (and most crypto coins) have branded themselves as being a "hedge" against inflationary woes, the real trend is yet to come. Crypto investors are banking on there being a massive loss of confidence in the USD and have much of that money flow into the crypto ecosystem for outsized gains. Either way, a "moment of truth" seem to be well on its way in 2022 as these trends continue unabated.
(As talked about in "Is Dogecoin Crypto's New Stablecoin?" and "The 'People's Coin' - Why Dogecoin is Forever", DOGE has shown relative resilience against today's downturn - the upside to its focus on utility over speculation.)
How Aggressive Will The Fed be? 4/11/2022ES Daily.
First off, most traders are not economists. In fact, most retail traders are (ironically) financially illiterate. For example, can you answer the difference between monetarist theory and Keynesian Economics theory? Do you know the difference between a 10K or a 10Q?
The reason why I'm making these statements is because most traders seem to confident in their predictions. However, once questioned with basic economic or financial questions, that's when you can tell their "prediction" is based on bias and opinion and not actual data. Historically, that type of behavior is dangerous.
For example, economists and retail traders were panicking over another recession back in 2011, 2013, 2015, and 2018.
The question is the title is also relevant. A lot of talking heads on news media, social media posts, and retail traders were so worried about the first rate hike leading up to March FOMC. In the macro view, the first rate hike rarely causes a large crash. Although, the weeks leading up to the first rate hike usually has a correction of around 11%-ish.
What traders should've been asking is how aggressive will the Federal Reserve be with both rate hikes and money vacuuming (reverse money printing)? Will they go slow like the 2010s or fast like in 2004-2007?
Historically, whenever the Federal Reserve aggressively raise rates and tighten, a recession follows 1-3 years after. 1979-80, 1990-92, 1999-2002, and 2008-09 all experienced aggressive tightening 1-3 years before.
Each recession has different conditions. 2008 had 14 years of bad mortgage debts. When the Fed aggressively raised rates from 1% to over 5% in less than 3 years, that didn't give enough time to prune out the bad debts in an orderly fashion. From that experience, that rocked the Fed's psychology which is why they went slow during the 2010s. After all, would you want to go down in history as the person who caused another 2008 Recession? Not many would.
The Fed's story is basically Goldilocks. Their quantitatively tightening should've be too fast or too slow. It's a balancing act. Too slow and inflation might run away. Too fast and a bigger recession might happen. The Fed managed to have low growth and low inflation in 2018. I think they're trying to strike lightning twice like they did in the 2010s and 1994.
Remember, it's very easy to say to accept a recession as a price to control inflation. It's much harder if you're not part of the ultra wealthy class. During 2008, the ultra wealthy lost their yacht or larger estate. The working class lost their jobs. The middle class lost their small businesses.
US02YUS02YAlarm in the markets: a part of the US interest rate curve is inverted that has not been in 16 years
US five-year bond yields rose as much as 10 basis points to touch 2.64%, outperforming those on 30-year bonds.
Receive a cordial greeting, In Spain on 08/30/2022
Sincerely, L.E.D.
US 10 YEAR BOND US 02 YEAR BOND US10YAlarm in the markets: a part of the US interest rate curve is inverted that has not been in 16 years
US five-year bond yields rose as much as 10 basis points to touch 2.64%, outperforming those on 30-year bonds.
Receive a cordial greeting, In Spain on 03/30/2022
Sincerely, L.E.D.
Bonds Sell Off on Hawkish Fed MinutesBonds are back to hugging lows, after a brief attempt at higher levels. We found immediate resistance one level above at 121'00. Even the rally to that level encountered serious resistance at every step, confirmed by red triangles on the KRI. We are back to lows again at 120'14. The Kovach OBV is very bearish so we can expect an imminent breakdown to lower levels. Our next target is 119'23, which is significant as we will have given up the 120's all together.
Risk: On or Off? Gold & BitcoinBitcoin has been touted as "digital gold" and even as an "inflation hedge."
When you compare BTC to Gold with long-term channels, the Bitcoin chart does look to mirror Gold at approx 15.6:1 timeframes... at least until recently.
Bitcoin's creation coincides with the biggest regime change since the USD was disassociated w/ Gold in the early 1970's, its entire existence has been under a dovish monetary environment that encourages risk-on behavior w/ unfettered government intervention into the markets w/ Quantitative Easing.
This loose policy has kept markets propped up since the housing market bubble burst. Unfortunately, the March 2020 pandemic response with global economies being halted resulted in unfettered stimulus and bloated Central Bank balance sheets resulting in the appearance of rampant, widespread, persistent inflation.
Central Banks are now at a crossroads, continue QE and a dovish policy regime that will exacerbate inflationary price pressures or reverse course.
Course reversal as bond yields increase is achieved by raising rate while central banks reduce $9 Trillion in assets.
This regime results in risk-off behaviors, apparently causing Gold:Bitcoin chart correlation to disassociate.
Given current market response, expect Gold to realize positive PA while Bitcoin is challenged by sell pressure while monetary policies tighten.
DXY - Longer term! $DXY Longer term view
Here's a longer term view technicals of DXY - Very important chart especially as we head into march with expected rate hikes and we do have FOMC today - as we anticipated the action forward ..Never forget the market is forward looking as yields head higher. The bullish momentum has occurred last yr Q4. Most of the % hikes is priced in but we could still have more bullish momentum to continue.
Bullish if we stay above 50/21 EMA.
Bearish if we go below 50/21 EMA.
KEY TIP: Higher time frame is always a good indication for short term time frame movement.
Trade Safe
Disclaimer: Not Financial Advice
NASDAQ Retraction Trend$NDX has followed the same general trends as $DJI & $SPX, seeing pullbacks as economic reporting comes in (CPI, PPI, DGO, New Home Sales...
The relief rally following the Fed's minimalist 25 bps rate hike has now reversed as markets prepare to absorb March's inflation numbers reporting next week.
Expecting retracement from the blue channel downwards as the FOMC meeting approaches in early May.
Fed total assets vs. TSLA (% change)November 2010 - November 2012
WALCL ~ +20%
TSLA ~ +100%
November 2012 - November 2015
WALCL ~ +60%
TSLA ~ +600%
November 2015 - November 2020
WALCL ~ +60%
TSLA ~ +600%
November 2020 -
WALCL ~ +24% (ATH)
TSLA ~ +240% (ATH)
...
Input 1
Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level
WALCL
Input 2
Tesla Motors, Inc
TSLA
Fed total assets vs. TSLA (2010-2022)Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level
WALCL/100000000
versus
Tesla Motors, Inc
TSLA/1000
Bitcoin (BTC/USD) Daily Chart Analysis For April 1, 2022Technical Analysis and Outlook:
Since Friday, March 25, Bitcoin's Inner Coin Rally $48,000 and Key Res $47,900 were completed, as shown on Daily Chart Analysis For March 25. The retest of the obsoleted Key Res $44,400 is a very low probability however is alive and well. The push to retest the completed Inner Coin Rally at $48,000 and Key Res at $47,900 and move substantially higher to the next Inner Coin Rally at $54,000 is in the cards.
MSACSR house marketHello receive a cordial greeting.
You have at your disposal the graph of MONTHLY SUPPLY OF HOUSES IN THE UNITED STATES and also in orange you have at your disposal
the ASPUS.
I recommend The Big Short both book and movie and seriously study what happened. Receive a greeting L.E.D
In Spain on 03/31/2022
MSACSR house marketHello receive a cordial greeting.
You have at your disposal the graph of MONTHLY SUPPLY OF HOUSES IN THE UNITED STATES and also in orange you have at your disposal
I recommend The Big Short both book and movie and seriously study what happened. Receive a greeting L.E.D
In Spain on 03/31/2022
US 10 YEAR BOND US 02 YEAR BOND US10YAlarm in the markets: a part of the US interest rate curve is inverted that has not been in 16 years
US five-year bond yields rose as much as 10 basis points to touch 2.64%, outperforming those on 30-year bonds.
Receive a cordial greeting, In Spain on 03/30/2022.
Sincerely, L.E.D.
Cup and handle forming on GLD! Time again to keep an eye on the price of GLD!
There are many factors that come into play with the price of gold. Our outlook remains bullish here technically and fundamentally. With the Fed having printed TRILLIONS over the last couple of years due to the pandemic they have drastically increased the supply of the dollar. This act has of course contributed to the inflation numbers we have been seeing over the last couple of months.
With the value of the dollar decreasing, we've seen drastic increases of value in multiple commodities such as lumber, nickel, copper, oil, natural gas...etc. As we see the dollar decrease further an inflation to continue higher it is only a matter of time before real money (Gold) starts to become the center of attention.
The headwinds against this in the short term is the Fed's decision to taper the purchase of bond assets so they can increase interest rates to "fight" inflation. The only problem with this is that we don't believe the Federal Reserve will really commit to fighting inflation via rising rates. Consensus for 2022 rate hikes at the moment is sitting around 4. This would likely put rates at around 1% by the end of 2022. If we include 2023 projections, we'll be looking at rates around 2% in 2 years (maybe 3% with more aggressive estimates). This flat out won't be enough to fight the inflation numbers that we're seeing.
Now if the Fed DOES decide to actively fight inflation and increase rates to upwards of 7% to fight this inflation, they will stunt economic growth and send markets spiraling downwards. We simply don't see the current regime at the Fed willing to do this. The only choice we have is to live with the current inflation for years and years to come.
US 10 YEAR BONDunited states yield curve.
Is the yield curve inverted 2021?
Today, the U.S. yield curve is not inverted, but it's getting a lot less steep in recent months. There's a 42bps spread between the 10 year and 2 year U.S. Treasury bond yields today. In March 2021, the spread was triple that.11 feb 2022
L.E.D. In Spain on 28/03/2022
Russell 2000 Futures -20% More$RTY1! lost 50 EMA support and racing to 100 EMA quickly on weekly, looks even uglier on daily as the pullback looks to be gaining momentum.
Next level of interest would be another -20% decline.
Last time this severe of a retreat was realized was March to May of 2020. The recovery was rapid given unprecedented amount of federal stimulus to prop the economy up.
Stimulus is not an option in the face of sharply rising prices with persistent inflation starting to rip across all sectors.
Markets shrugged off initial Fed communications and FOMC 25 bps rate hike, clearly reflecting lack of belief in Central Banks' conviction.
More volatility ahead as recession lurks in the wings and stagflation appears likely without regime change.
Will sanctions on Russia backfire on the U.S.? What about crypto- Sanctions, led by the U.S. in hopes of punishing Russian aggression may NOT have the impact the U.S. is hoping for? Could they actually backfire?
- Saudi Arabia rejects Biden's request for talks on increasing oil production and instead announces that they are considering accepting Yuan instead of dollars for Chinese Oil sales (per house rules, links to sources are not allowed)
- India's move to "explore" alternative payment channels with Russia to avoid sanctions (per house rules, links to sources are not allowed)
- With official inflation numbers running at 8% and climbing the Federal Reserve is being forced to raise interest rates for the first time since 2018 (per house rules, links to sources are not allowed). Multiple rate hikes are projected. The last time rates were raised markets crashed and the Fed quickly reversed course. This leads many to say that the Fed won't really raise rates as much as projected, because the market won't let them, but what these people don't seem to get is that in order to finance the U.S. national debt, new debt has to be sold every year. As inflation rises countries like Saudi Arabia become more and more inclined to invest in assets that show a return or at least hold their value. This means that unless you raise the rates to a level that offsets inflation many investors will move elsewhere and you won't be able to take on new debt. Central banks are cornered. Once they start raising rates government budgets will quickly hit a wall as interest payments on existing debt become unmanageable.
- This may devastate the dollar along with the U.S. economy, but it may be great for crypto
Bitcoin Bullish Reversal Post FOMCTraditional markets responded with rallies following the Federal Reserve's tame communication following the FOMC meeting this week.
The 25 bps hike is nothing more than a symbolic statement, with the midterm elections looming and the Fed finally acknowledging that inflation is more persistent than what they had hoped.
The lack of serious action is likely to result in a reversal to near-term bullish action while inflation continues unchecked.
The next few months of "business as usual" are likely to support more upward prices, with CPI & PPI continuing to climb.
With the Fed's dovish stance and inflation soaring, there will be a significant amount of attention on what steps to take.
The real question is: can the economy support rampant inflation until midterm elections in November?
Market Response to FOMC Rate Hike"Laugh Out Loud"
Market action clearly indicates no concern in near-term about the Federal Reserve taking significant action to reign inflation or cool the economy down.
Dovish environment means more of the same rip-roaring good times.
Rampant Inflation Impacting Producer Price IndexWall Street over the past few weeks appeared to be preparing for a more hawkish Federal Reserve approach to tamp down on sharply rising prices.
The FOMC did raise rates by 25 bps, and the markets promptly responded by going higher. The markets' responses indicate the Fed completely lacks credibility in doing anything to get prices under control... instead the Central Banks have committed to stability and adopting a status quo approach in the near term.
Rationale appears to be mid-term elections and a desire to not "upset" the markets given tremendous uncertainty.
Instead of taking responsible action, it appears that inflation will continue drive higher, and a simple trend reflects PPI raising at least 4% as midterm elections draw closer.
Short-term, markets will continue to behave bullish, inflation will continue to rise, and the depth of a total market correction will be deeper the longer this continues.
Unfortunately, it's apparent that a regime change will be necessary at the Fed... likely resulting from rampant inflation and a landslide Republican win at the polls. High probability the GOP will have control of both chambers of Congress going into 2023.
