US02Y
Macro - Reading The CurveForecast for Macro:
- Falling Wedge Breakout must be re-tested.
- Bear Flattener coming as short-term rates rise with Fed tightening expectations:
- 2x ATR spike in US02Y:
- The Fed members will probably all have their turn to make comments, leaning hawkish. This should cause a rally in the US02Y.
- Bonds Volatility Technically Bullish:
- However, this will be followed by a steepener, respecting the Falling Wedge Breakout, as the Fed implements monetary policies to control Deflation, creating a Stagflation environment.
- US30Y, this is bearish and deflationary:
- USOIL, deflationary. The US economy depends on Oil:
- US Manufacturing Employment Index, looks to be at the top of the range, and on a decline:
- Capital goods are the heart of every economy. Without manufacturing employment, no capital goods. No capital goods, no innovation.
- CN30Y, also bearish and deflationary:
- China's Credit Impulse, and consequently - global credit impulse turns negative.
- No more credit flows means no more liquidity to flow into risk assets.
- M2V declining, if the economy was booming and growing, money velocity should be increasing:
- Business destruction cannot be inflationary. Thriving tech businesses lead the recovery, but Tech is inherently deflationary.
- Reading the curve will be critical to see the macro turns coming!
GLHF
- DPT
US10Y - Strategy WeeklyA couple of things to note here as the chart clearly shows the attempt of a break on the log-chart.
We now know Sellers are attempting the strategical and important pin on their opponent. It is clear the inflation trade is deteriorating, and in the most profound sense looks rather like a deeper mission that is underway. On the technical side, the next levels in play with a break on the chart here are at 1.00% and 0.50%.
The next charts is clearer as to what we were tracking, firstly the US10Y has completed the full retrace back towards 1.5%/1.75%, and secondly, a lot of unwinding has begun in Commodities and Cyclicals as Oil retreats from the key 75 resistance.
With a break in the log-chart, these larger areas of the chart are now rendered useful for freer manoeuvring and can trigger a sharp uptick in volatility for those who are becoming quite rigid. We need to keep an eye on the state of affairs in inflation and wages in particular, although when looking at the headings cooking for the US via fiscal tightening and etc, it looks like the inflation trade as a lot further to unwind yet.
Game, Set and Match!📌 ridethepig | Game, Set and Match!
In order to inform ourselves about the dangers of this move, we shall in what follows point to a few live charts which we called live together from 2019 that the 2s5s was going to invert frantically , and was a bad sign. It enables occupation of the dominos, which for those following long enough will know the one thing we always through individually is our playbook .
1️⃣ Every other time this happened it ended badly for the global economy via recession. ✅
2️⃣ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". ✅
3️⃣ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet , one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. ✅ ✅
Powell's noble attempt to pick a fight with the end game in an economic cycle can be regarded as having come to nothing. The threat comes from confidence and credit . Aiming for a complete annihilation across risk assets later in 2021, the presence of the inversion was sufficient. Now this move is being made with momentum.
Game
Set
... & Match
The simplest example is to explain the move with diagrams which was the wish here. To occupy a piece of tradingview real estate with a live walk through in the end of an economic cycle. This could be considered as a momentum move in the sense of the word. The rule is:
I’m long vol for a very long time.
Insane risks are palatable but you need to understand the game otherwise you have a very high likelihood of total destruction.
Stay long vol short dollars.
We are entering into a series of exchanges between public and private assets, the door is closing, like in the Star Wars movie when Chewy and Harrison Ford are running to the doors, we can see the door closing in China, and in Russia and yet we still have a chance to get out.
An exchange towards a decentralised world is possibly into 2032.
A Macro Thread on YieldsThe bond market can be quite tricky.
In terms of yield curves consider the following:
Bear steepening
Bull Steepening
Bear Flattening
Bull Flattening
> Steepening (the premium for longer debt is growing)
> Flattening (the premium is shrinking)
For example, bull steepening, which is exactly what we have been doing this since the start of this year:
The short-end of the yield curve (typically driven via fed funds rate) falls faster than the long-end, steepening the yield curve.
The long end of the yield curve is driven by a wide range of factors, including - economic growth, expectations, inflation expectations, and supply and demand of longer-maturity Treasury securities and etc
📍 A bull steepener
↳ is a shift in the yield curve caused by falling interest rates - rising bond price - hence the term “bull”.
📍 A bull flattener
↳ is the opposite of a steepener - a situation of rising bond prices which causes the long-end to fall faster than the short-end.
📍 Bear steepness and flatteners
↳ are caused by falling bond prices across the curve
A bull steepener is a change in the yield curve caused by short-term interest rates falling faster than long-term rates, resulting in higher spread between the two rates. A bull steepener occurs when the Fed reserve is expected to lower interest rates. This expectation causes consumers and investors to become optimistic about the economy and bullish about prices in the stock market above the short-term.
Thanks as usual for keeping the feedback coming 👍 or 👎
It's Different This Time... Right...📌 Endgame in the economic cycle and illustrating a painful recession
Yields had the opportunity to move and successfully played the 'elastic band' rejection from the inversion in 2019, which despite the length of the global CB combination, can be expressed in no other terms than reckless. FED was obviously aiming for the ideal position (the frontal defence from Fiscal this time around) which is a well known counter when the issue comes from private debt, however they were forced to 'bend the knee'.
Things proceed as follows:
1️⃣ Every other time this happened it ended badly for the global economy via recession. ✅
2️⃣ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". ✅
3️⃣ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet, one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. 👈 'we are currently here'
The Whitehouse has decided to follow hyperinflation, Dem voters were naive in this sense and thought they could hold rates lower forever without any consequences. Now we must waste more time pursuing their distant dream that taxation is a solution.
Wishful thinking if you ask me... the kind of overdrafts these governments have run up are several multiples beyond even Piketty's theoretical tax base. This ending of a cycle is a pragmatic demonstration of the lust to keep 'putting it on the card' and leaving private debt problems to future generations because of time being finite.
Finally a notion which carries its own duties:
In a debt crisis, as Japan have known for some 30 years a) you do not want an appreciating currency as the cost of servicing those debts will skyrocket in real terms and b) remain nimble...(get a peloton if necessary).
Thanks as usual for keeping the feedback coming 👍 or 👎
Yield Cuve vs. SPX#YIELD #CURVE WHERE ARE WE?
The big melt up could still happen...but I would be cautious what you wish for.
History doesn't favor bulls here.
U.S. 10Y Yield Post Debate (9/30)
The U.S. 10 Yr. Yield Jumped over 5.2 BP to +7% , following a full in prices post debate. This is the highest since sept 18th.
ridethepig | 10Y Treasury Note📌 Yields are clearly hesitant to subscribe to the V shapers in Global Equities. An important observation in an extraordinarily difficult trading environment. The 0.90% - 0.50% range is clearly defined and from time to time we have had to get involved with a gentle grin and attempt to play both sides.
The 0.50% lows are 🔑 for this battlefield, as long as they are holding there is nothing to see to the downside. Losing the lows creates a freedom manoeuvre towards 0.17%. Otherwise all sellers are to be viewed as sacrifices and necessary in the basing formation. Expecting an eventual solution to the topside with 1.0% and 1.45% targets into 2020/2021.
Thanks as usual for keeping the feedback and charts coming 👍 or 👎
ridethepig | Recession Strategy📍 This chart update comes from the ' Alpha Protocol - Seeking Immediate Extraction '
The cramped inversion should aways be considered the end game of an economic cycle. But of course we will get the v shapers and naysayers who obliges that stonks only go up. The space available to operate against the Robinhood army is becoming more flexible. Sharp speculators are seeing more of an advance in the 2's 5's curve and abandoning ship when it suits them.
The threat of recession completely materialised and shows the importance of outguessing its weakness. You can learn from this inversion that:
1️⃣ Every other time this happened it ended badly for the global economy via recession. ✅
2️⃣ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". ✅
3️⃣ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet , one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up.
Powell's noble attempt to pick a fight with the end game in an economic cycle can be regarded as having come to nothing. The threat comes from confidence and credit. Aiming for a complete annihilation across risk assets into 2021, the presence of the inversion was sufficient. Now this move will be made with momentum.
Real Yields vs. Gold (Divergence of the Year)What are real interest rates? The real interest rate is the rate of interest an investor, saver or lender receives after allowing for inflation. It can be described more formally by the Fisher equation, which states that the real interest rate is approximately the nominal interest rate minus the inflation rate.
Now, two scenarios unfold. One, the gap in the chart closes when real yield goes back below zero. As we transitioned into QE this year--rightly so with bonds inverted 6 months before-- before COVID. It was the catalyst. Now with 5 years of the fed funds rates being near 0 to "average out" inflation, how to you think this chart will respond?
A tip. QT is the opposite of QE.
ridethepig | End Game in the Cycle📌 This diagram portrays the final stages in the economic cycle which I called in 2019. The position arose after Equities began extending beyond reality; all sellers needed was an intending cause.
The construct of the ingredients here are clear and simple, after Fed cleared the runway till 2022 you can see the risk coming out of bonds. Of course now it creates the "following subtle trap" where the belly of the curve begins to move towards the front end which then brings the 30Y with it.
It is worth pointing out where other countries in the world are as there is little divergence on the rates differentials now:
📍 Spain
📍 Singapore
📍 Canada
📍 UK
📍 Japan
📍 Germany
There is no reason why the US cannot see a retracement back to 0.9% / 0.8% levels ... Watch for the next dominos in Equities and Gold based on deep knowledge of the flows as we can call it. More risk to come.
ridethepig | US Yields Breaking Higher!So much for the 5th wave... the formulation has truncated after the payrolls report.
This is an example of an erroneous freeing. In similar patterns, the rebound will translate in a 5 wave impulsive sequence which is somewhat cramped after the knee-jerk reaction from covid. The appropriate positional response to the lows here is to ride the pig , what we are talking about is taking measures outguessing the road to normalisation of rates which we have not yet recognised as such.
Now we turn to the analysis of play in unemployment claims, despite how the media are selling business as usual we have a long (and likely sluggish) road to recovery, because of the poor handling of lockdowns and closures.
The one who is playing the macro data always has the upper hand, but this is especially the case once we clear the 'knee-jerk reaction' from the virus. The recurring bankruptcies, layoffs, social unrest and shutdowns have been forgotten about after politicians promising diversions! Smart money will not move so easily. Retail will pay their tribute in the form of horrible losses to an unconditional truth. Vix has completed the round trip, first prize to all those riding it from 85!
Of course the swing from 85 was no less imaginative than the swing from +/- 11 lows:
We are entering into a new development for volatility, my models are forecasting a dramatic expansion into year-end which will make it very difficult for manual or emotional players. 2022/2023 looks like the start of the next bull run in global equities, expectations are for advanced conditions to remain with us for 12-18 months.
Weekly Downside for 2 yr yield Short 01:57:49 (UTC) Tue May 19, Weekly Downside for 2 yr yield Short 01:57:49 (UTC) Tue May 19,
FR US yields vs EURUSDInterest rates are crucial in the movement of currencies. The blue is EURUSD. Those things are not 100 percent correlated but it is something that needs to be paid attention to.
In this post I will demonstrate the relationship between French American bond yields (interest rates) differential and EURUSD.
We use 2 principal yields 2 yearly and 5 yearly composite differential.
As you see, once the yields differential hits the resistance or reversal level (here we use DeMark and Camarilla reversal levels) - there is a reaction in EURUSD. EURUSD keeps moving some 30 pips more (fakeout?) and then turns as well.
On weekly differential chart we see that the differential is at 0 level after a poor bullish breakout. There is also fractal pattern in play.
We also see DeMark monthly pivot squeeze on 60 min (DeMark squeeze predicts volatility and turns in the markets).
You may also use German yields instead of French ones - not much difference actually.
Both American and European yields are in their lowest levels. German ones dropped below 0.
ridethepig | US10Y Market Commentary 2020.04.10An important chart update for all early and late cycle players, the lows in US10Y Yields are not yet locked and this is holding the window open for a final leg to the downside cooking in Global Equities and risk markets.
A lot of buying interest in bonds towards 0.85 / 1.00 highs which will be enough to keep the downtrend in pay. I am looking for a full ABC completion from a strictly technical sense to complete the pattern. It will make things a lot easier for later in the year / into 2021 (and beyond).
On the map a very simple area to track:
Steel Resistance 0.89 <=> Strong Resistance 0.77 <=> Soft Resistance 0.69 <=> Mid-Point FLIP 0.6 0 <=> Soft Support 0.48 <=> Strong Support 0.39 <=> Steel Support 0.30
Thanks as usual for keeping the support coming with likes, comments, charts and etc... jump in with your questions and views!
ridethepig | One For The History Books...Negative US Rates !!!Negative rates are finally here for the US with the 6mo t-bill ticking below -2bps (feed is slightly delayed here). Simply meaning that you will now need to pay the US government for 6mo cash deposits. This is the only way they can continue in the "end game" strategy.
It is a well known phenomenon that the US 2's 5's was ringing alarm bells last year , those who were able to conduct their middle-game carefully were able to build credible trading ideas that leave the opposition hopeless in the endgame.
One of the main requisites for BTC to succeed in the endgame is based on the ability that FED can continue to confiscate while the "People vs Establishment" narrative deteriorates via lack of confidence in monetary policy. The endgame is much more the part of trading in which advantages are needed from economics. Now, the realisation of advantages, specifically advantages in Volatility .
In order to understand the flows across the entire board, you must learn about the endgame by starting from its individual elements, because it has such elements, just like the opens and middle-game strategies. We have previously already dug into these in detail that allow you to form ideas like this for the crash in German Equities.
Thanks as usual for keeping the support coming with likes, comments, charts and etc!
Interesting days are coming.Interesting days are coming. In my analysis, I indicated that there could be a 50 basis point cut in interest rates. Although intervention could have been anticipated, early in the morning, it surprised everyone. Let's look at the analysis. Apparently it did not affect market pricing. We have reached the technical target price. This is 0.611% (The chart in the analysis is the yield curve for two-year bonds) This means that the market expects such a rate for the next two years. In other words, we can say that Future is a curve of interest. In my opinion, the exchange rate can now calm down. A back adjustment may be made to the 1% level of the interest rate band. After that, the market greed may start again. The market may price interest rates close to 0% (0.1%).
