Top Is In? Ugly GDP Print and 10 Year Treasury Yields Break DownI've been waiting for today to arrive as the Q2 GDP print is in and was ugly as expected. The awful number reported (a -32.9% collapse) was expected but I'm looking for some "trigger" that might change the market mood and I've suspected the GDP number could be it. Seeing the worst GDP decline on record, even worse than during The Great Depression, might be a wake up call for the majority of people that never look at economic data, despite the fact it was "expected."
In support of that suspicion is the 2nd major event I was waiting for: a breakdown in treasury yields. The last few months 10 year treasury yields have NOT rallied with stocks creating this huge disconnect between a euphoric equity market and a glum bond market--and again this is something the average Joe doesn't watch. Today the yields on the 10 year treasury broke down from the support we've seen holding for months (shown on the chart in blue). It even broke below the spike down that happened on April 21. Yields are breaking lows, bond values are rallying, and this is exactly the opposite of what should happen if the stock market rally were on solid footing. Unless yields reverse and go back up, I'm calling this an early indicator that the stock euphoria has been wrong and the top could be in.
Treasuries
US dollar - US Treasuries Divergence The US dollar correlates positively to US Treasuries.
Market participants needs US dollar when buying US Treasuries as investments or as collateral.
Now we see a pretty sharp diverence and break of that correlation.
One would anticiapte a return to mean of this relationship.
My base-case is that the dollar will follow bonds and get bid up.
In short, my reasoning is as follows:
If liquidity continues to be tight, as low interest rates and central banks going crazy are signaling, the dollar will catch a bid as it's still the world reserve currency.
Regardless of my bias: when macro correlations diverge, its time to pay attention.
10-YEAR US BOND YIELDS BREAKING DOWN - BEARISH for SPXUS 10-year Bonds have broken out of 2 triangles now and breaking down.
I count 5 waves in this massive triangle that formed between March 8th and June 24th with the final wave "e" itself being a triangle with 5 subways.
Remember - triangles - per Elliot rules - are found either as wave 4's, wave B's (middle of a correction) OR as wave E's as the final "wave" of another bigger triangle.
Since the breakdown out of these 2 triangles, the lower trendline of the larger triangle was tested at least 4 or 5 times from the underside, and each time was rejected - confirming the significance of this lower trendline and the subsequent breakdown in yields.
I anticipate this yield breakdown will accelerate to the downside with strong bearish implications for the SPX, Dow, etc.
An interesting observation is that the 10-year rose after making its low on March 8th - while the SPX made its low on March 23rd - 15 days later.
Bonds yields are not confirming the rise in the SPX since the 10-year broke down on June 24th and now we are 28 days later so the divergence is past due for the SPX to now play catchup to the 10-year and move down.
Cheers!
Cyrus
US 10 Year yield looks to be heading lower soonThe 10 year treasury yield looks ready to resolve its multi-month consolidation triangle to the downside. There's room for another run up to the .70% area over the next couple weeks, but I ultimately believe we are heading for lower yields. Note the fairly swift rejection from the rally above the 50MA at the end of May / start of June.
I'm not making any plays directly on treasuries, but watching closely because a definitive break lower in yields would signal that stock markets may be heading for a major risk-off move.
TLT Bull Flag - Heading to 170 and BeyondWhen looking at the iShares 20+ Year Treasury Bond (TLT) exchange traded fund (ETF), it is important to consider whether or not interest rates are likely to rise or remain low. Here, the relationship between Treasury yield bonds and interest rates is key to understand.
Generally speaking, if you predict interest rates to rise in the future, it is best to avoid long-term bonds (such as the TFT, which is a 20-year Treasury bond) that could lock in a lower interest rate. However, if you believe interest rates will fall, then it makes sense to invest in an ETF like the TFT.
Long-dated U.S. Treasuries remain the best non-derivative hedge for Canadian investors. Now there will be a time when we won’t want to touch US Treasuries with a 10 foot pole but for now, Treasuries and the U.S. dollar are still seen as safe haven assets and should provide us protection if/when stocks falter.
10 yrThis looks bad to me, either 10 yr will pump here (which seems unlikely) or the SP500 will crash together with the 10 yr.
this would put the SP500 around 2750 area. OUCH!
10 yrlooks like another pull back coming today to the markets and next week will be a good week for the bulls. Buying swings today & tomorrow for next week could be a great long swing set up.
Treasuries Looking BearishShould be good for at least a small play, but the corollary could also be that markets are poised to move up in the coming days (I'm still not sure why).
10 yrTreasuries look to be signaling that yesterday & today are in fact buy the dip we have risk on sentiment coming next couple weeks.
If we check the weekly RSI 10 yr yields r very overbought, coincidentally so are all major indices RSI weekly indicators.
Conclusion is we are in the final chapters of the bull market since March and another crash is imminent. But will likely be another opportunity to buy the best dip before another massive bull market over the next few years.
10 yrGuys just so you r all aware. There will be no bear market, they have been canceled indefinitely.
Every-time any of you think about getting into bunker and hoarding food, gold bars or paying Peter Schiff Harry Dent or any of the fear mongers just look at my chart. In fact burn it into your brains. Stock always go up. Just buy buy buy. So easy
Semiconductors breaking downThat market is absolutely littered with declining wedges (UGAZ, LABD, SOXS, TMF to name a few)!! I thought this was the tastiest and look like it will turn a corner early in trading and begin trading down. I hope everyone shorted gold miners and closed today because they're turning up tomorrow!
Treasuries: As usual, I was a little earlyI was waiting for the end of the wave to occur, but with the appearance of a descending wedge I know a buy opportunity awaits us. My apologies, I was just a little early! What worries me though is that with a rise in the treasuries perhaps the wider market will sell off?
Yield curve 10's and 2's - uninvertingI wouldn't be long any stock market index from here. Long PM's gold and silver with silver overweight. *Not financial advice just opinion*.
TMF: Time to Buy Treasuries?There's a wiff of deflation in the air and the market has broadly, although not chaotically, sold off. It appears like a massive ascending wedge is developing in Treasuries.
10 yrtreasury yields consolidating between the 786 & 618 of this most recent move inside of this A Sym Triangle. Which way will it break?
GoNoGo Charts sees strength in treasuries, TLTInvesting in treasuries has always been seen as a flight to safety and this last few months has been no different. Although the S&P 500 has rallied sharply since falling into a bear market in March, it is still down around 14% year to date.
TLT, the treasury bond fund, on the other hand, is up almost 25% over the same period.
The GoNoGo Trend signaled a “Go” early in January and although it painted 1 amber bar on the 18th of March has continued to paint blue bars ever since. Note that there have been several green re-entry icons during this time.
Interestingly, we recently tested zero on the GoNoGo Oscillator and have bounced off it. This suggests a renewed upward move. The most recent re-entry green circle was April 20th. An upside target could be the prior high on March 9th.
What does this mean for the S&P 500? See the linked idea below.
Apple Support - lower than you thinkHi, thanks for viewing.
I think there is less demand for over-priced (subjective call) personal electronics at the moment. People are rightly thinking about more essential items, paying down debt, and increasing savings.
Probably worth pointing out how strong the 200 week moving average is as support - somewhere around 185, which is lower than people think. Anyone out there thinking that they are safe because "Warren Buffett bough Apple" need to look into the recent cut-losses by Berkshire Hathaway. Warren said many many times in the past things along the lines of "I don't understand electronics firms, so I don't invest in them," "I don't understand Apple so I don't invest," "if I ever invest in airlines - then call the Psychologist because I have lost my mind." Not direct quotes, but anyone who has followed Warren Buffett for a long time will know what I am talking about.
So, what happened recently? Berkshire cut losses on Delta Airlines - shares bough expecting the bail-out would somehow replace lost customer demand and bleak fundamentals. To hear that Warren even bought Airline shares just doesn't sound right to me. The same here, they invested in Stocks they didn't understand as well as their traditional 'bread and butter', departed dramatically from a value investing philosophy, and they will have to take their losses - just like everyone else. Apple is over-valued. Anything that is 'consumer discretionary' that may be affected by the steep drop-off in consumer demand will be sold - at least until the future comes into sharper focus. I bought a cheaper smartphone recently after getting annoyed at having to charge my iPhone before the day was over. My new phone has an 11,000Mah battery and I don't even need to charge it every day - every second day is more than enough. I don't need to pay crazy prices for cordless earphones, or $1000 for a computer stand etc etc. Apples has a good product, not necessarily the best in class, but they are compensating for lower sales by raising their prices - that makes them more vulnerable to lower consumer discretionary spending in the event of an economic downturn.
I am not sure if I will be a buyer at $185, because we are in the biggest economic shock of a lifetime. But there will likely be a bounce at that level.
Now we can watch how this market unfolds. The forces at play are massive US, ECB, BOJ stimulus versus a massive supply chain, and demand shock. Unfortunately, the Fed cannot make people able to afford their credit card bills, their rent, medical costs, cannot re-create a supply chain, or convince anyone that savings aren't essential right now. Long-term, they will have to convince the public that massive and un-serviceable Fed and Public debt isn't something to worry about. That owning public debt that yields below inflation and cannot be paid from income is a good idea. I am very concerned that all the monetised debt this year and next will be met with lower and lower demand as people realise they are not being adequately compensated to hold it, and that at maturity it will be paid in newly printed devalued USD. US Treasuries are a promise to deliver USD in the future, that promise to pay is very unlikely to be funded by additional income, so T-bonds are effectively a promise to print money. Anyone who knows about gold, knows that all the brakes have been taken off the gold price recently. ZIRP (that can never be raised), global uncertainty, negative real yields of 10 year T-bonds, and a struggling equity market, all lend strength (and reduce the opportunity cost to hold it) of gold.
Ok, I ended up going a little off-road there. But we are over-all in a "risk off" environment. Safe havens will out-perform vs equities or treasuries (treasuries have stopped being a safe haven). Corporate debt is definitely not a safe haven.
Cash is king in a crash This is looking at the dollar situation during this crash. And some other dollar risk situations. Definitely long the dollar during the crash. Long the DXY dollar index against other currencies. Very long gold on the up bounces. And short the market, the whole market.
