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2 Year Treasury Bond Yield vs FED Funds RateThis post is intended to show the current gap between the market for the 2 year US treasury yield on bonds and the official funds rate, and why the market is forcing central banks hands into raising interest rates when the market is in such a fragile state in ability to support and maintain debt at heighten interest rate levels. Simply put, bond market are crashing (i.e. no one wants to hold onto treasure bonds at present because they are yielding very little / people are losing faith in governments ability to uphold their debt obligations / competition in the market for credit is rising etc. etc). All these factors play into buying selling behavior and is repriced in the market. As a bond or lone has a fixed bond or repayment structure ($amount), if the capital price the bond changes hand in the secondary market is lowered, the effective yield from the bond goes up. For example if a bond is made for $10,000 and requires a 10% interest rate (i.e. $1,000) per specified period, then if this loan / contract / bond (same thinking) is changed hands in the secondary market and sold for $5,000, the new own still receivers the conditions of the prior arrangement. Hence $1000 per period. As the price was $5,000, then the interest or Yield on that bond is now 20% (i.e. $1000 / $5000 x100 = 20%). As new credit is competing against the secondary market (i.e. you could loan your money out to a new loan or you could buy an existing loan (Bond) on the secondary market), this is how the bond market drives interest rates. Complicated but hope this makes sense. in summary, falling bond prices cases rising yields or interest rates. Raising bond prices causes lower interest rates. Central Banks play in this market as a market participant with an unlimited check book (this is how new base currency or M1 enters the market ( QE - Quantitative Easing) or is removed from the currency supply (QT - Quantitative Tightening ). If Central Banks want interest rates to rise, they flood the market with bonds, dropping the market prices with excess supply and causing yields to rise. If they want interest rates to drop, they soak up supply in the market of bonds, causing prices to rice and yields (interest rates to drop). This process is called 'Open Market Manipulation'. AKA planned market manipulation at it's best. www.federalreserve.gov The 'official funds rate' is just a forecast which shows how the Central Bank plans to manipulate the bond market until it's next meeting. Interest rates on loans / bonds etc should be viewed as a measure of risk of default. High interest rates reflect the reward on offer for lending your currency out and the risk you will not get it back. In short, Market conditions (such as inflation ) changes investors view on risk. When Central Bank manipulation of the bond market goes our of whack with the risk to lending in the market, we see large gaps between the yield curves on bonds between the official funds rates issued by the Central Bank . This gap is clearly shown this chart, comparing the 2 year yield against the Official FED Funds rate (the interest rate you hear about on the TV). History shows the 2 year is a good leading indicator on what Central Banks will do with interest rates. Make no mistake, the market and inflation is forcing Central Banks to raise interest rates. I very much question the robustness of 'the economy' to handle higher interest rates at present.
TVC:US02Y
by Brodie
3
How Yesterday's CPI Impacted the US DollarThe DXY rallied massively, one of the only assets to benefit off a strong CPI reading which suggests the Fed will double down on their efforts to curb inflation. We had broken down into the 107's, then blasted through two handles to the 109's again. We are currently in the midst of our levels between 109.26 and 109.86, after testing and rejecting 109.86. We have to break through 110.20 before we can establish new highs and make a run for our next target at 111.37. If we retrace, 108.50 should provide support.
TVC:DXYLong
by quantguy
What Yesterday's CPI Means for the Fed and StocksA hotter than expected CPI print tanked stocks yesterday, wiping out this week's rally and then some. The markets were hoping that CPI, which is the Fed's favorite inflation gauge, would show that inflation is plateauing and that their policies are working. Under these assumptions it would be reasonable to think that after September's rate hike, they would take a more dovish position. However with red hot inflation beating expectations, this is clearly not the case, and some think the Fed will double down on their stance, hiking rates to 100 bps when 50 bps was more likely just a few days prior. The S&P 500 responded accordingly, smashing through the 4000's, and reestablishing the 3000's, finally finding support at our level at 3928. It is likely the markets will equilibrate as we digest CPI, so expect the S&P to remain bounded by 3909 and 4009 for now. We will need to wait for more data to come out this week (retail sales on Thursday and University of Michigan sentiment on Friday) to get a clearer picture of the state of the economy, and how the markets will react further.
FX:SPX500Short
by quantguy
Gold's rally stalls ahead of key US inflation dataRecent price action on gold appears to be corrective, given the overlapping natures of the swings and choppy trading conditions as it grinds higher. The retracement has stalled around the 38.2% Fibonacci level and weekly R1 pivot point, and a two-bar bearish reversal formed at the resistance zone to suggest the market is trying to top out. That said, corrections always have the potential to push a little higher before momentum truly turns - and we also have a key inflation report which brings the potential for volatile spikes before its next move fully plays out. The bias remains bearish 1750 ahead of today's CPI report (with a view to scale in and tighten stops should momentum turn lower). The initial bearish target is the weekly pivot point around 1710-13 support zone, a break beneath which brings the 1700 support zone into focus.
CITYINDEX:GOLDCFDShort
by CityIndex
Nasdaq NQ - 8 Days & 1,700 PointsThe more I observe price action and the more I analyze charts, the more I feel that although the markets are absolutely primed for a major and inevitable correction towards the pre-COVID highs, which for Nasdaq and SPX are far under the June lows, we're on the cusp of a preceding bear lynching. In my recent SPX call, I had forecasted a trip to the 3,8xx range early on in this Labor Day week in anticipation of everyone's favorite global market manipulator Federal Reserve Chairman Jerome Powell speaking on Thursday with FOMC and an inevitable rate hike looming on the 21st: SPX / ES - Bull Whips and Bear Saws What I had thought likely to happen was an early dump, followed by a pump into his speech, and then the beginning of our correction cycle. And yet after observing the price action of Bitcoin and Ethereum over the weekend (significant since they tend to lead or match with the SPX since they have a CME futures market) in addition to Monday's price action when NYSE/TSX were closed for the weekend and today's strangely simple dump-into-accumulation pattern, I have since been forced to revised my theory. I now believe that Big Jerome's talk on Thursday, September 8 is actually going to be used to propel the markets back to areas close to August highs. Taking a look at my calendar, if this theory is true and Jerome was to pump it, you'd have eight trading days to do so until FOMC. Afterwards, counting FOMC, there's still eight days left in the month to crash this plane straight into the side of the mountain all the way below July's lows as well. What's the fundamental thesis for my theory? It's simple. One is that they've been selling a lot of VIX-enhanced puts for the last week and a half and a bull run will drop VIX back to like 19 and all those puts that they sold with high implied vol for monthly OpEx will expire worthless. The second is that with VIX crushed, smart money can buy a large amount of October and November puts on the cheap for when we revisit 10,000 Nasdaq/SPX 3,500. And the third is that with the USD going rampant, Wall Street Journal reported today that foreign buyers are going full ape risk-off trying to buy US equities because their national currencies are collapsing. All on its own, perhaps it doesn't matter, yet consider that USDJPY is printing 143 and then Yen is the most worthless its been in 24 years: Japan is most significant since the Bank of Japan pays no yield on bonds and so all that old, generational money props up the US equities market as it seeks returns elsewhere. Also, the Bank of Japan's next meeting, where it really may have to finally abandon Yield Curve Control, is on the same day as FOMC: Sept. 21. If BoJ is forced to raise their rates, finally, to try to save the Yen, and the Federal Reserve does something fun like 100 bps at the same time, you really are going to see the market crash with astoundingly violent force. And if something this exciting were to happen, of course, as a Wall Street sociopath and a proper market maker, you would want prices to be high in advance, to take full advantage of the foreign market brought to you and the delightful opportunity to throw everyone off balance. For all of this to work out will require that we aren't yet at the bottom. And we're not. Instead, I believe the pattern will be some kind of support or double bottom or stop sweep established around one of the June pivots @ ~11,500. This is under the psychological 12,000 level and also doesn't totally break market structure yet. Then, to rip it in the other direction back to a reasonable level will require a number roughly like 13,400. I do not believe they will take out the August high because what will unfold is ultimately a bull trap and not a true bear squeeze or a trend reversal. Now you might think to yourself that this is too much volatility. This kind of pump is too far away, too fast. And this notion is really very reasonable. However, I want to point out that Nasdaq did better than this in March, where it ran 2,300+ points in 11 trading days. Actually, counting the first eight trading days only, it more or less made 2,000 of those points. And so, you all need to be careful. If this is totally wrong and you buy the bottom and it dies, well, it will hurt, but not so much if you keep your risk low. There will be good chances to buy a healthy gap up. Where you're likely to get hurt is bottom shorting. But the ones who are really going to get skinned are the FOMO crowd and the people who have no idea what time it is. For a few days you will have returns. And for one weekend in the middle of September, as the autumn air chills, you'll be able to enjoy martinis at the bar, feeling like you've made it back to Tesla $1,000 Apple $200 and are thinking about what to waste your future winnings on. But what comes after the Party is over will be like waking up from a dream and finding yourself inside of a concrete nightmare. Because the drive down this time won't be like January-May was. It will gap down and the Terminator will be deployed, and hard, a lot like the COVID days. But perhaps this time the Fed won't have any QE to save you with, because the intention is not to save you and keep the old Party going this time, it is to create a crisis and then save you from that crisis with a new Party composed of their technocratic paradigm of super communism.
CME_MINI:NQ1!
by LordWrymouth
4
Bitcoin important level, follow the Dollar Index.13:10UTC FOMCSubscribe and get a free Bitcoin and Ethereum trading strategy every day Today I expect increased volatility in the market at 13:10 UTC Powell FOMC speaks, as always the work of great manipulators may be the S&P 500 index showed a little buying power yesterday, but you should not relax, I also recommend working from a small risk. Now we will discuss with you an important level in bitcoin. And so today also consider both scenarios for both bulls and bears. Bulls For a local upward exit, Bitcoin needs to consolidate above the 19550 zone and trade there, the main local resistance level is 19400, but I don’t want to take a short position from it. Expect the result of Powell's performance at 13:10UTC Bears Today, after Powell's speech, anything can happen, a sharp drop in volumes with confirmation on TF 1H will give me a signal to trade SHORT positions on the breakdown of the local loy. Such a scenario for today, stick to your theory, have a short stop order. Good luck
by Anton_t_t_t_eng
Can Gold Maintain The $1700's?Gold tanked again, but as predicted, found support at 1705, the last level of the 1700 handle. We knew the small rally we saw the last time we tested 1705 would be short lived as it barely moved the dial on the Kovach OBV. Also, we ran into resistance from the 0.236 Fibonacci level, and just did not have enough momentum to break through. These two factors both suggested a retracement. Currently, we are forming a double bottom at 1705, but things are looking pretty weak. We are running into immediate resistance at 1715. If we give up the 1700's, then 1692 is the next level down. We expect 1683, the lower anchor of our Fibonacci levels to hold as a lower bound.
COMEX:GC1!Short
by quantguy
DXY Hits Our Target!The US dollar has shot higher, blasting through our target of 109.86, and hitting our next target of 110.20 exactly before retracing slightly. We frankly thought it would take longer to hit this level, but the DXY clearly has a lot of momentum. The Euro is now below parity and bond yields are soaring, which has contributed to a strong dollar. A technical retracement is likely so watch for those levels in the 109's to provide support, otherwise 108.50 should be a floor for now. Our next target is at 111.37.
TVC:DXYLong
by quantguy
What to expect from GBPUSD at multi-year lowsGBPUSD bears have dominated the market so aggressively over the past 14 months. The Russia/ Ukraine war, Socio-economic tensions, and the successive FED interest rate hikes have only served to accelerate this sell-off. However, price has reached a pivot as it bounced off 1.1500 psychological level which is also a double bottom pattern on both the Weekly and Monthly charts. To put things into perspective, you'd have to go back to April 1985 to get a lower price than this current level! This is way before the market even became deregulated for retail trading! This level could serve as a profit taking level which could attract some Bullish price action in the coming days The Daily chart also hit a Descending Channel support which intersects the key level support. We have had successive bearish BOS on the H1. Before I go long, I will like to have a shift in direction signified by a CHOCH then a pullback to a H1 demand level
Long
by Autofx
DXY Hits Our Target! What's Next?The US dollar has broken through highs and hit our exact target at 109.86, before retracing slightly. The headline Nonfarm payrolls today was a miss, suggesting weakness in the economy which might effect the rate hike probabilities slightly, but we are still expected to see a 50-75 bps rate hike this month. That being said, the hawkishness of the Fed is likely to be completely priced into the forex market soon, and the dollar may be topping off. If we do see another rally, then 110.20 is the next target. Otherwise, we should see support from the 108's, at 108.50 in particular.
TVC:DXY
by quantguy
How will Today's Nonfarm Payrolls Release Effect Stocks?The S&P 500 caught a small rally yesterday, but it could be short-lived. After such a strong selloff, we were due for a relief rally at some point. It appears the markets are still pricing in what the Fed will do this month at their FOMC meeting, but a 50-75 bps is the most likely. We tested the exact level we predicted at 3909. Subsequently, we bounced back to the upper 3900's, where we started running into resistance. In particular, 3978 is proving difficult to crack, but if we are able to, then 4009 will be the next major hurdle and first level in the 4000's. If things turn south, expect support at 3909 again, then the next major level is a low at 3825, but we are likely to find some support in between for the time being. Headline figures from Nonfarm Payroll data for August suggest some weakness with a headline miss and two month downward revision. This may dampen the Fed's hawkish tone slightly, but we are still likely to see the rate hike we mentioned above. Stocks are likely to continue in a slump until September's FOMC.
FX:SPX500Short
by quantguy
Recession Keeps Hammering StocksIncreasingly more market participants seem to be realizing that we are, in fact, in a recession, despite what our overlords are proffering in the propaganda outlets. The S&P 500 has careened into lower levels, finally finding support just one level above that which we predicted yesterday at 3909. Indeed, 3928 seems to be holding, with green triangles on the KRI confirming support. The Kovach OBV is abysmally bearish, but may be starting to show some meager signs of leveling off. After 3909, the next major target is 3825, another relative low. If we are able to catch a relief rally then 4009 is the next target.
FX:SPX500Short
by quantguy