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Interestrates

10 Year wants 5%...at a minimumDo you really need to ask if interest rates have topped out? Head & Shoulders patterns at tops and bottoms are generally spot on...this Inverse H&S pattern occurred at a bottom, clearly broke out from the neckline and just wants 5%...at a minimum. "Don't fight the Fed" The Fed is not going to pivot to the downside anytime soon...why would they? What makes anyone think this is on the horizon? Here are the 3 things Powell stated would need to happen for a pause (not a pivot ) at Jackson Hole: 1. Lower Growth 2. Softening Labor Market 3. Inflation on pace to 2%. 2022 Q2 vs. Q3 GDP came in positive and much stronger than expected, Jobs reports remain hot and inflation isn't anywhere near 2%. So at this point, we can't even check off any boxes for a possible pause in rate hikes let alone a pivot . In addition, Powell hasn't really wavered in his statements since Covid, he's been pretty straightforward, so why would he all of a sudden change his behavior?
TVC:US10YLong
by Vixtine
10
NZD slides against the Japanese YenThe New Zealand Dollar (NZD) is trading bearish against the Japanese Yen (JPY) at 87.386 on Friday, October 27, 2023, following comments from Japan's Chief Cabinet Secretary Taro Matsuno that the Bank of Japan (BoJ) is expected to conduct appropriate monetary policy. Matsuno's comments come amid rising expectations that the BoJ will eventually tighten monetary policy in response to rising inflation in Japan. The BoJ has been maintaining an ultra-loose monetary policy stance for many years, but this has led to a significant weakening of the JPY in recent months. The NZDJPY currency pair has been under pressure in recent weeks as investors have priced in the possibility of a more hawkish BoJ. The pair has fallen by over 5% since the start of October. The bearish outlook for NZDJPY is further supported by the technical outlook. The pair has broken below a key support level at 88.00, and is now on track to test the next support level at 86.50. Factors Weighing on NZDJPY There are a number of factors weighing on NZDJPY at present, including: Expectations of BoJ tightening: The BoJ is expected to be one of the last major central banks to tighten monetary policy, which is putting downward pressure on the JPY. Rising inflation in Japan: Japan's inflation rate has been rising in recent months, which is putting pressure on the BoJ to tighten monetary policy. Global risk aversion: Global investors are currently risk averse, which is leading to a sell-off in riskier assets such as the NZD. Weak New Zealand economic data: The New Zealand economy has been slowing in recent months, which is weighing on the NZD. Technical Outlook for NZDJPY The technical outlook for NZDJPY is bearish. The pair has broken below a key support level at 88.00, and is now on track to test the next support level at 86.50. If NZDJPY breaks below 86.50, it could fall to 85.00 or even lower. Trading Strategy Traders who are bearish on NZDJPY could consider shorting the pair at current levels. A stop loss could be placed above the recent high at 88.00. A profit target could be placed at 86.50 or 85.00. It is important to note that the foreign exchange market is volatile and prices can move quickly. Traders should always use risk management techniques when trading currencies.
Short
by masterclass618
Inflation not down under!Australia's CPI data, released yesterday, showcased figures hotter than anticipated. While this may not be 'reaction-worthy' news on its own, the scenario in Australia is worth delving into for several reasons. Inflation Trends Initially, let's consider inflation trends. In most western economies, although inflation remains above central bank targets, the trends are on a downward trajectory. However, when juxtaposed against those for the European Union (EU) and the United States (US), Australia's (AU) inflation rates on a month-over-month (MOM) and year-over-year (YOY) basis still stick out from the norm. Moreover, yesterday’s CPI prints surpassed consensus on both the YOY & MOM basis, indicating a notable deviation from expectations. In fact, Australia's YOY CPI is now on its longest streak above inflation expectations, and crucially, inflation expectations have ceased revising downwards. Given the higher inflation levels compared to its peers, consensus estimates, and expectations, inflation remains a significant concern for Australia. Interest Rates In the realm of interest rates, Australia has been a long-standing “pauser,” having maintained its policy rate unchanged since its June meeting. This prolonged pause now further opens the leeway to raise rates, especially given the “watch and see” approach adopted towards burgeoning inflation. Additionally, its interest rates remain low compared to the US, EU, Canada, and even New Zealand. As a result, on the real rates basis, Australia trails far behind, with its policy rate still 1.3% behind its inflation rate, significantly less restrictive compared to other economies that have already moved into positive real rates territory. We posit that the RBA is behind the curve and has room to react, given the considerably long period of pause and still negative real rates. The market seems to echo this sentiment too, as the odds for a hike in the next meeting surged post the CPI news, moving from 21% to 55%! Against multiple currencies, the AUD appears to be threading above the long-term support level, a threshold that has essentially defined AUD low. This strong support is expected to hold, given its tested and respected level across multiple currency crosses since 2020. Policy turning points between the two currencies, as indicated by the turn in the interest rate differential, have generally marked the trend change for the currency, notably for the AUDEUR pair. Given the persisting high inflation in Australia compared to various economies and metrics, should market expectations trend in the right direction, it's plausible the Reserve Bank of Australia (RBA) may react with a rate hike. This action could tilt the rate differential and interest for the AUD, bolstering the currency. To capitalize on this bullish view on the AUD, we can consider a long position on the AUDEUR. We can set up this trade via a long position on the CME Australian Dollar Futures and a short position on the CME Euro FX futures to create a synthetic long AUD/EUR position at the current price level of 0.5951, stop at 0.5865 and take profit at 0.615. Given that one CME Euro FX futures is for 125,000 Euros and one CME Australian Dollar Futures is for 100,000 Australian Dollars, this suggest that we should use two Australian Dollar Futures to one Euro FX Futures to match the contract size, given that 125,000 Euros is roughly equivalent to 210,000 Australian Dollars at the prevailing exchange rate. Each 0.00005 increment in the Australian Dollar Futures is equal to 5 USD and each 0.00005 increment in the Euro FX Futures is equal to 6.25 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com melbourneinstitute.unimelb.edu.au www.rba.gov.au www.asx.com.au www.cmegroup.com
ECONOMICS:AUINTRLong
by inspirante
2
BluetonaFX - EURUSD Under Serious PressureHi Traders! Today is a big day for the EURUSD with the ECB's interest rate decision followed by their press conference. The pair is under some pressure and is approaching its yearly low at 1.04485, and we could see that being broken depending on the ECB's decision today.   Price Action 📊 The market recently broke its long-term ascending price channel, and momentum looks to be on the bearish side. The market is also below the 20 EMA. Fundamental Analysis 📰 The Eurozone has shown strong Flash PMI data recently, so traders will be looking for positive statements from the ECB regarding the Eurozone's inflation issues. Support 📉 1.05090: PREVIOUS WEEK'S LOW 1.04485: YEARLY LOW Resistance 📈 1.06946: CURRENT WEEK'S HIGH Risk ⚠️ No more than 2% of your capital. Reward 💰 At least 4% of your capital. Please make sure to click on the like/boost button 🚀 as your support greatly helps. Trade safely and responsibly. BluetonaFX
Short
by BluetonaFX
UK and Canadian Inflation RatesOverview UK and Canadian inflation rates will be released next week. These events could provide insight into whether the Bank of England(BOE) and the Bank of Canada(BOC) decide to raise rates further. The Details As things currently stand, the BOE will likely pause rates, and the BOC will raise rates again. This is in line with the current inflation figures. Next week's inflation figures - Tuesday 17th for Canada and Wednesday 18th for the UK - may give more precise direction to what the BOE and BOC decide what to do next: hike, cut, or pause. August's inflation figure for Canada was 4.00% and 6.70% for the UK. Things to Consider: If September's inflation figures are higher or the same as August's, this gives a greater chance of further rate hikes. Another rate hike from the BOC will likely strengthen the CAD. Another rate hike from the BOE will likely strengthen the GBP. If September's figures are lower than August's, this gives a greater chance of the central banks holding rates and lowering rates in the near future. This will weaken the CAD and GBP. Key CAD pairs could be FX:EURCAD FX:GBPCAD FX:AUDCAD Key GBP pairs could be FX:GBPAUD FX:GBPCAD FX:GBPNZD
by Samuel_Morton_Trader
$DXY & $TNX & Rates show signs of exhaustionThe US #Dollar has pulled back a bit: At MAJOR SUPPORT At Green Moving Avg = Support RSI is at 50 (neutral bullish unless crosses lower) Weekly TVC:DXY is 50-50 The RSI is curling over but the MACD is now above 0 = down trend over Hmmm, interesting scenario Not sure what to make of it Monthly #currency ------------------------------- The 2Yr #Yield broke the recent up trend. While it has performed better than shorter term #interestrates it's gotten weaker recently. The RSI & MACD have been trending lower for some time and it's much easier to see on a weekly! Look @ that Severe Negative Divergence! Could rates be DONE? ------------------------------- The 10 Yr #Yield on the other hand has built good deal of steam lately. Weekly it is overbought. Monthly it's overbought as well. But what is interesting is that the MACD has only been higher 1x than current scenario. MACD histogram lower (arrow) = future MACD neg crossover? However, it's nowhere near as weak as short term #interestrates TVC:TNX
TVC:US10Y
by ROYAL_OAK_INC
EURAUD bullish on dovish RBA Bullish EUR/AUD on Dovish RBA Monetary Policy Reunion The Reserve Bank of Australia (RBA) held its latest monetary policy meeting on October 3, 2023, and decided to keep the official cash rate (OCR) at 4.10%. This was widely seen as a dovish move, as markets had been expecting a 25 basis point rate hike. The RBA's decision was likely influenced by a number of factors, including the recent slowdown in the Australian economy, the ongoing war in Ukraine, and the risk of a global recession. In its statement, the RBA noted that "inflation is higher than expected in Australia and globally, and is expected to remain high for some time". However, the RBA also said that "growth in the Australian economy is expected to slow in the coming months, and the unemployment rate is expected to rise". The RBA's dovish stance is likely to be positive for the EUR/AUD currency pair. A lower OCR in Australia is likely to make the Australian dollar less attractive to investors, while a higher OCR in Europe is likely to make the euro more attractive. In addition to the RBA's monetary policy decision, there are a number of other factors that are currently supporting the EUR/AUD currency pair. These include: The ongoing war in Ukraine, which is weighing on the global economy and boosting demand for safe-haven currencies such as the euro. The risk of a global recession, which is also boosting demand for safe-haven currencies. The European Central Bank (ECB) is expected to start raising interest rates in the near future, which would further support the euro. Technical Analysis From a technical perspective, the EUR/AUD currency pair is currently trading above a key trendline. This suggests that the pair is in an uptrend and is likely to continue to move higher in the near future. The next key target for the EUR/AUD currency pair is the 1.70 level. If the pair can break above this level, it could then move towards the 1.75 level. Conclusion The EUR/AUD currency pair is currently in a bullish trend and is likely to continue to move higher in the near future. This is supported by the RBA's dovish monetary policy stance, the ongoing war in Ukraine, the risk of a global recession, and the ECB's hawkish stance. From a technical perspective, the EUR/AUD currency pair is currently trading above a key trendline. The next key target for the pair is the 1.70 level. If the pair can break above this level, it could then move towards the 1.75 level. Trade Idea Buy EUR/AUD above 1.66 with a target of 1.70 and a stop loss below 1.6356. Risk Warning Trading foreign exchange (forex) is a risky activity and can result in substantial losses. Please ensure that you understand the risks involved before trading forex.
Long
by masterclass618
1
US10Y: Soaring Bond Yields as Federal Reserve Maintains Hawkish The Fed Hawkish Stance During Wednesday's address, Federal Reserve Chair Jerome Powell reinforced his stance on tackling inflation with a more cautious approach. He emphasized that the central bank is not yet finished with its efforts to curb inflation and hinted at the possibility of implementing multiple interest rate increases during future monetary policy meetings. Powell's statement comes as a response to the ongoing challenge of bringing down inflation, which has consistently remained above the central bank's target of 2%. Notably, some Fed officials have emphasized in recent speeches that inflationary pressures persist. They specifically highlight core inflation, which excludes the volatile prices of food and gas, as not decelerating as rapidly as overall inflation. The aforementioned statement supports the potential scenario of higher Government Bond Yields in the future, as an increase in interest rates typically correlates with elevated yields. Technical Analsyis The U.S. government's 10-Year Bond Yield has undergone a retracement, precisely at the 0.5 Fibonacci ratio, establishing a support area. Notably, the yield currently exhibits a bullish trend as it remains above the EMA 200 line, indicating positive market sentiment. Furthermore, the Falling wedge pattern suggests a continuation of the prevailing trend. Complementing this observation, the stochastic line crosses within the neutral area, further bolstering the case for a possible upward movement toward the target area. It is important to keep in mind that once the target/support area is reached, the roadmap provided may no longer be valid. If you find this analysis helpful, I encourage you to show your support by clicking the rocket button and sharing your opinions in the comments section below. "Disclaimer: This analysis is intended solely for educational purposes and should not be considered as a recommendation to take a long or short position on the TVC:US10Y ."
TVC:US10YLong
by financialfreedomgoals101
9
H&S and Dark Cloud Cover indicate short term bearish reversal?Heidelbergcement's future not looking good amid a raising interest rates environment for real estate promoters. Technical analysis: Bearish A Head and Shoulders pattern could be underway since Sep 2022 and once the stock has reached a double ceiling level at 77.50€. Besides, a Dark Cloud cover was formed on Friday 29th of September in the right shoulder and today's candle seems to be confirming the candlestick pattern prophecy, which would lead us to first support level ranging from 68.5-70.5€. Beyond analysis and POV: Bearish and Bullish The fact that Vonovia has frozen 60.000 apartments that were supposed to be built now also indicates a reduction of materials' demand to build houses and perhaps other real estate promoters have come up with the same decision. This means, less materials needed for now which could potentially affect Heidelbergcement's profits in the near future. However, the ISM Manufacturing PMI came better than expected for September (actual 49, exp. 47.7 prev. 47.6). This means, any short-term bearish reversal could not last long. Fundamental analysis: All bullish considerations The debt level is considered satisfactory with a net debt to equity ratio of 32.8%. Earnings Payout to Shareholders is 26%. P/E ratio = 7.5 while industry average is 9.1.
XETR:HEIShort
by alexinve
S&P500: Balance sheet extends drop.Will interest rate peak soon?The S&P500 has been declining for more than two months straight reaching the HL trendline from the market bottom. It is useful to look into the Fed's role on this whole long term price action and what better timeframe to use than the 1W. As you can see, the Fed's Balance Sheet (orange) is extending a long term decline that started more than one year ago, while the Interest Rate (teal) continues to rise. You don't need to go back any further than the 2018-2019 period, which was marked by the extensive trade wars between the U.S. and China. The key to recovery was when the Interes Rate peaked and flatlined. That was when the stock market bottomed and growth stability returned to the markets. The recent (almost) two year inflation crisis has the market in an even more advantageous position as it's been one year since it recovered and priced the bottom, despite the fact that the Interest Rate is still rising. Theoretically when the Interest Rate peaks and turns flat, we should see a more stable stock market growth. With the S&P500 on a HL support and the Balance sheet still dropping, do you think the Fed will pull the trigger and soon announce in one of their next meetings an end to rate hikes? ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
TVC:SPX
by InvestingScope
3
Could a Surge in Mortgage Rates Imperil the Housing Market?Over the past 18 months, U.S. mortgage rates have soared from 2.9% to 7.6%, their highest since 2001. Will this tremendous increase in mortgage rates cause the U.S. housing market to crash like it did in 2008? On one hand, higher mortgages have led to a steady decrease in the number of new mortgages being issued. In recent weeks, the number of new mortgages has fallen to its lowest level since 1995. On the other hand, there is a major difference between today and the period leading up to the global financial crisis: vacancy rates. Vacancy rates are extremely low. Before the 2008 financial crisis, 10% of rental properties and 3% of owner-occupied properties were vacant. Today, only 6.4% of rental properties are vacant, near their lowest since 1985, while owner-occupied properties have a record low vacancy of 0.7%. Home prices have stopped rising, but so far, they aren’t collapsing. Over the past year, the price of buying a home in the U.S. has fallen by about 1%, while rental costs have risen by around 8% as higher rates force many would-be buyers into the rental market. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZB1!
by CME_Group
AUDUSD DOWNTREND CONTINUATION FOLLOWING USD INTEREST RATES 09/23AUDUSD has been in a bear market July 2023. Price stalled out and ranged since August 2023. We have since seen bulls try to break out of this 3-month range and failed every time. The resistance is around 0.6530, which is yet to be broken. We recently have seen a strong rejection of that resistance following last weeks USD interest rates. The Australian Dollar has been a weak currency in the basket of majors for several months this year and the United States Dollar has been getting stronger. I am awaiting my trigger just below 0.64159 and am a bit late to the action so my P/L will not be as ideal as I planned but I will take what I can get and still be realistic with the target which is sitting at 0.6360 lows which is also where many longer term buyers may have their stop losses if the uptrend doesn't work out in their favor. I will be utilizing a trailing stop loss along the progression of the trade and have my hard stop around today's daily highs in case it does not work out in my favor. If the trade fails then the price may go back into chop or could be a possible reversal towards range highs of 0.64159.
Short
by bajapips
Market Update - September 22, 2023 Bitcoin has an up-and-down week as Mt. Gox delays repayments: Bitcoin (BTC) started the week off rallying from $26.5k USD to $27.4k USD before paring its gains by Friday. Mt. Gox trustees delayed repayment of more than 140,000 BTC and other cryptos by a year, extending the deadline to October 2024. Fed holds rates steady as one more hike expected this year: In line with expectations, the US Federal Reserve held its target benchmark interest rate at 5.25%-5.5%. One more hike is expected by the end of 2023, with interest rate cuts anticipated starting next year. Judge blocks the SEC from immediately reviewing Binance.US software: The SEC faced a setback in its case against Binance.US, as a judge blocked the agency from immediately reviewing the exchange’s software. A follow-up hearing is slated for October 12. Optimism completes third community airdrop and plans private sale: Optimism (OP) airdropped ~19.4 million OP tokens (~$27 million USD) to eligible users. The team also announced a private sale of 116m OP tokens (~$162 million USD) to seven buyers. 🪂 Topic of the Week: Crypto Airdrops ➡️ Read more here
GEMINI:BTCUSD
by Gemini
ES FOMC INTEREST RATE IDEA (LEAKED FROM *SMART MONEY*)bullish idea, there's lots of space to the upside and plenty of orders to take off the initial news burst. as long as we move up follow the plan. if we move down, and only if you are not already in a position, i'd take smaller longs and add later only if it comes back to the initial idea. if price falls to the depths of hell, well, fine. just short the first pull back and come off break even for the day and wrap it up no hard feelings. keep it easy guys it aint stressful for real. delete this message after you read it they are watching your activity nvm this message will self destruct
CME_MINI:ES1!Long
by Claybo
1
MACRO MONDAY 10~ Interest Rate & S&P500MACRO MONDAY 10 – Historical Interest Rate hike Impact on S&P500 This chart aims to illustrate the relationship between the Federal Reserve’s Interest rate hike policy and the S&P500’s price movements. At a glance the chart highlights the lagging effects of the Federal Reserves Interest Rate hikes on the S&P500 (the “Market”). In all four of the interest rate hikes over the past 24 years the S&P500 did not start to decline until 3 months into an interest the rate pause period (at the earliest) and in 3 out of 4 of the interest rate pauses there was a 6 – 16 month wait before the market begun to turn over. The move to reducing interest rates (after a pause period) has been the major warning signal for the beginning or continuation of a major market decline/capitulation. We might have to wait if we are betting on a major market decline. In the chart we look particularly at the time patterns of the last two major interest rate hike cycles of 2000 and 2007 as they offer us a framework as to what to expect in this current similar hike cycle. Why is this cycle similar to 2000 & 2007?.. because rates increased to 6.5% in 2000, 5.25% in 2007 and we are currently at 5.50% in 2023 (sandwiched between the two). These are the three highest and closely aligned rate cycles over the past 24 years. The COVID-19 crash is included in this analysis but has not been given the same attention as the three larger and similar hike cycles 2000,2007 & 2023. The Chart We can simplify the chart down to FIVE key points (also summarised hereunder): 1. Previously when the Federal Reserve increased interest rates the S&P500 made significant price gains with a 20% increase in 2000 and a 23% increase in 2007. - Since rates started increasing in February 2022 we have seen the S&P500 price make a sharp decline and then recover all those losses to establish an increase of 5% at present since the hiking started. - This means all three major interest hike cycles resulted in positive S&P500 price action. - For reference, a more gradual rate hike pre COVID-19 also resulted in 20%+ positive price action. 2. When the Federal Reserve paused interest rates in 2000 it led to a 15% decline in the S&P500 and then in 2007 it led to a 28% increase in the S&P500. It is worth noting that a lower interest rate was established in 2007 at 5.25% versus 6.5% in 2000. This might indicate that this 1.25% difference may have led to an earlier negative impact to the market in 2000 causing a decline during the pause phase. Higher rate, higher risk of market decline during a pause. - At present we are holding at 5.5% (between the 6.5% of 2000 and the 5.25% of 2007). 3. In the event that the Federal Reserve is pausing rates from hereon in, historic timelines of major hike cycles suggest a 7 month pause like in 2000 or a 16 month pause in line with 2007 (avg. of both c.11 months). For reference COVID-19’s rate pause was for 6 months. - 6 - 7 months from now would be March/April 2024 and 16 months from now would be Nov 2024 (avg. of both Jun 2024 as indicated on chart). 4. As you can see from the red circles in the chart the initiation of Interest rate reductions have been the major and often advanced warning signals for significant market declines, including for COVID-19. 5. It is worth considering that before the COVID-19 crash, the interest rate pause was for 6 months from Dec 2018 – Jun 2019. Thereafter from July 2019 rates begun to reduce (THE WARNING SIGNAL from point 4 above)…conversely the market rallied hard by 20% from $2.8k to $3.4k topping in Feb 2020 at which point a major 35% capitulation cascaded over 6 weeks pushing the S&P500 down to $2,200. Similarly in 2007 the rates began to decline in Aug 2007 in advance of market top in Oct 2007. A 53% decline followed. The lesson here is, no matter how high the market goes, once interest rates are decreasing it’s time to be on the defensive. Summary 1. Interest Rate increases have resulted in positive S&P500 price action 2. Interest rate pauses are the first cautionary signal of potential negative S&P500 price action however 2 out of 3 pauses have resulted in positive price action. The higher the rate the higher the chance of a market decline during the pause period. 3. Interest rate pauses have ranged from 6 to 16 months (avg. of 11 months). 4. Interest rate reductions have been the major, often advanced warning signal for significant and continued market decline (red circles on chart) 5. Interest rates can decrease for 2 to 6 months before the market eventually capitulates. - In 2020 rates decreased for 6 months as the market continued its ascent and in 2007 rates decreased for 2 months as the market continued its ascent. This tells us that rates can go down as prices go up but that it rarely lasts with any gains completely wiped out within months. September – The Doors to Risk Open We now understand, as per point 2 above, that an Interest rate pause is the first cautionary signal of potential negative S&P500 price action. Should the Fed confirm a pause in September 2023 we will clearly be moving into a more dangerous phase of the interest rate cycle. Based on the chart and subject to the Fed pausing interest rates from September 2023 we can now project that there is a 33% chance of immediate market decline (within 3 months) when the pause commences with this risk increasing substantially from the 6th and 7th month of the pause in March/April 2024. I have referenced previously how the current yield curve inversion on the 2/10 year Treasury Spread provided advance warning of recession/capitulation prior to almost all recessions however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level (See Macro Monday 2 – Recession Timeframe Horizon). Interestingly September 2023 will be the 6th month of that 6 – 22 month window. Both todays chart and Macro Monday 2’s chart emphasize how the month of September 2023 opens the door to increased market risk. Buckle up folks. March/April 2024 – Eye of the Storm On Macro Monday 2 – Recession Timeframe Horizon our average time before a recession after the yield curve starts to turn up was 13 months or April 2024 (average of past 6 recessions using 2/10Y Treasury Spread). From today’s review of the Interest rate hikes impact on the S&P500, we have a strong indication that March/April 2024 will be key high risk date also. Now we have two charts that indicate that the month of Mar/Apr 2024 will come with significantly increased risk. Its worth noting a pause could last 16 months like in 2007 lasting until Nov 2024, at which point we would be pretty frustrated if we had been preparing defensively since Mar/Apr 2024. Just another scenario to keep in mind. The Capitulation Signal Based on today’s chart, should interest rates at any stage decline we should be prepared for significant market decline with immediate effect or within 2 months (at worst). Regardless of any subsequent increases in the market, these would likely be wiped out within 6 – 9 months by a capitulation. An optimist could run a trailing stop and hope it executes in the event of. Bridging the Gaps Please have a look at last week’s Macro Monday 9 – Initial Jobless Claims if you would like to measure risk month to month. The chart is designed so that you can press play and have an idea of the risk level we are entering into on an ongoing basis. In this chart we summarised more intermediate risk levels with Sept-Oct 2023 as Risk level 1 (yield curve inversion time window opens and potential rate pause risk increase) and Nov-Dec 2023 as stepping into a higher Risk Level 2 (as increase in Jobless claims average timeframe will be hit). Should the yield curve continue to move up towards being un-inverted and should Jobless Claims increase then Jan 2024 forward this could be considered a higher Risk level 3 leading the path to our Risk level 4 defined today which is March/April 2024. Final Word It is worth noting that the Fed could surprise us and start increasing rates again, they may also not pause interest rates in Sept 2023. For this reason I included the small black and red arrows that provide a general timeline across different rate periods to help us gauge a market top (red arrows) and a market bottom (black arrows). The black arrows suggest a time window of 27 – 32 months from now being the market bottom. A lot of people are focused on when a recession or capitulation will start, we may want to start thinking a step ahead and prepare for the opportunity that will present itself at a market bottom. Having a time window can help us plan and be psychologically prepared to consider taking a position in a market of pain and fear should the timing window align. If we are expecting this bottom in between Oct 2025 and Mar 2026, we can make more rational decisions when the streets are red. We can try to make more definitive calls and decisions on an ongoing bases so please please do not take any of the above as a guarantee. We know the risk is increasing now and a lot of charts indicate incremental increases in risk up to Mar/Apr 2024, Nov 2024 and even January - March 2025. All of theses dates are possible trigger events but ultimately we don’t know. We are just trying to prepare and read the warning signs on the road as we drive closer to a potential harpin turn. If you have any charts you want me to look at or think would be valuable to review in the context of the above subject matter please let me know, id love to hear about it. PUKA
ECONOMICS:USINTR
by PukaCharts
6