Mega Cap Tech Strong / Banks weakThe market almost closed positives today in the back of tech stocks rallying.
A massive gap down was bought up off the lows today. Banks continuing's to sell off despite yields and the dollar cooling off today.
Yields
How the Fed affects long Bond YieldsInverse chart of US10Y Yield to show changes in Bond prices.
Overlayed with the following:
Fed Funds Rate
US Treasury Deposits to Federal Reserve Banks
Increase/Decrease Rate of change to Fed Balance Sheet
Balance Sheet Total in separate pane below
The USCBBS Percentage Change shows the money raining down :-D
It's clear to see the relationship between the Fed buying Treasuries, i.e. Quantitative Easing (QE) and the increase in US10Y prices.
Quantitative Tightening (QT) is the name of the game now. There is A LOT of QT left to do, we're at most 25% into QT since the Fed has only rolled off roughly 1Trillion. They likely have 3+ Trillion to go. Expect US10Y to be under continued pressure as long as QT is in effect. Even when Fed Funds rates are lowered it will have little effect on US10Y while the biggest buyer of Treasuries is on hiatus.
Inflation SupercycleOn the afternoon of October 3rd, 2023 something unprecedented happened in the U.S. Treasury market. For the first time ever, bear steepening caused the 20-year U.S. Treasury yield and the 2-year U.S. Treasury yield to uninvert.
Bear steepening refers to a scenario in which long-duration bond yields rise faster than short-duration bond yields, as bond yields rise across the term structure. In all past instances, inverted yield curves have normalized due to bull steepening . The probability that bear steepening would cause an inverted yield curve to normalize is so low that, until now, most term structure models excluded the possibility of it ever happening. In this post, I'll explain why this anomalous event is a major stagflation warning.
The chart above shows that the 10-year Treasury yield has been rising much faster than the 3-month Treasury yield throughout 2023, narrowing the once-deep yield curve inversion.
Since a yield curve inversion indicates that a recession is coming, and bear steepening indicates that the market is pricing in higher inflation for the short term, and even more so, for the long term, then bear steepening during a yield curve inversion indicates that high inflation may persist even during the recessionary phase. High inflation during the recessionary period is what defines stagflation . Since very strong bear steepening is normalizing a deeply inverted yield curve, the combination of these events is a warning that severe stagflation is likely coming.
High inflation has caused Treasury yields to surge at an astronomical rate of change. Bond prices, which move in the opposite direction as yields, have sharply declined causing destabilizing losses. The effects of these massive bond losses are not even close to being fully realized by the broad economy.
The image above shows a bond ETF heatmap with year-to-date returns. Large losses have been mounting across numerous bond ETFs. Long-duration Treasury ETF NASDAQ:TLT has declined by more than 18% this year. Click here to interact with the bond ETF heatmap
Despite the extreme pace of monetary tightening, many central banks are still struggling to contain inflation. Inflationary fiscal spending and ballooning debt-to-GDP levels are confounding central bank monetary policy efforts. In Argentina, for example, inflation continues to spiral higher despite the central bank raising interest rates to 133%.
The chart above shows that the central bank of Argentina has hiked interest rates to 133%. Despite this extreme interest rate, the country's inflation rate continues to spiral higher. In an inflationary spiral, there is no upper limit to how high interest rates can go.
As the Federal Reserve tightens the supply of the U.S. dollar -- the predominant global reserve currency -- all other countries (with less demanded fiat currency) generally must tighten their monetary supply by a greater degree in order to contain inflation. If a country fails to maintain tighter monetary conditions than the Federal Reserve, then the supply of that country's (lesser demanded) fiat currency will grow against the supply of the (greater demanded, and scarcer) U.S. dollar, causing devaluation of the former against the latter. In effect, by controlling the global reserve currency, the Federal Reserve is able to export inflation to other countries. This phenomenon is explained by the Dollar Milkshake Theory .
The forex chart above shows FX:USDJPY pushing up against 150 yen to the dollar. The longer the Bank of Japan continues to maintain significantly looser monetary conditions than the Fed, the longer the yen will continue to devalue against the U.S. dollar.
The meteoric rise in bond yields is particularly concerning because it has broken the long-term downtrend, signaling the start of a new supercycle. After hitting the zero lower bound in 2020, yields have rebounded and pierced through long-term resistance levels.
The chart above shows that the 10-year U.S. Treasury yield broke above long-term resistance, ending the period of declining interest rates that characterized the monetary easing supercycle.
We've entered into a new supercycle, one in which lower interest rates over time are a thing of the past. The new supercycle will be characterized by persistently high inflation. It will start off insidiously, with brief periods of disinflation, but over the long term it will accelerate higher and higher, ultimately causing today's fiat currencies to meet the same fate that every fiat currency in history has met: hyperinflation.
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Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
Why it might make sense to craft a tail hedge now! Say you’re bearish but find yourself confused by the market. You want to partake in the action if things go south, but not 100% certain, what could you do?
First, you could build some conviction by identifying potential reasons why you think the market could dip lower… Then, devise a ‘tail hedge’ to profit if things indeed go south.
Let’s break down these two steps this week.
In our past two articles, we've highlighted a couple of reasons why we lean bearish. You can find them here: S&P500 Vulnerabilities: from Money Supply to Sectoral Imbalanc & Why we’re watching the Bond/Equity Volatility . But as each week unfolds with more drama, let's revisit the market.
The first idea we want to bring up is the rates-equity dislocation.
On the equities front, we observe the following:
The conventional wisdom has long held that low rates are good for stocks. However, with stocks rising while the Fed hikes rates, has this relationship been disrupted? From 2020 to the end of 2021, we clearly observed this classic dynamic. However, from September 2022 onwards, as stocks continued their ascent despite the Fed's rate hikes, a distinct shift became evident. Could this Equity-Rate dislocation be a by-product of the AI hype? Consider Nvidia’s stock price, which seemingly pinpointed the Nasdaq's low point.
Question is… Is the AI hype a strong enough factor to permanently alter this relationship?
In terms of overarching themes, there are generally defined up and down trends. AI ETFs seem to provide a rough gauge of the sector's peaks and troughs. With the previous peak in 2021 happening in the ETFs right before Nvdia peaks, again now we see a similar trend with the ETFs seemingly having peaked while Nvida trades slightly higher still, and we wonder for how long more?
If this signals a pivot for Nvidia, then the Nasdaq, currently buoyed by AI hype, could falter.
Now, turning to rates: What could drive rates higher? A string of robust US economic data regarding jobs and inflation has emerged. Recent figures for CPI, PPI, and NFP all exceeded consensus estimates, suggesting a robust US economy. Such data might embolden the Federal Reserve to maintain its tightening cycle.
One way to interpret robust economic figures is through an economic surprise index, such as the Citi Economic Surprise Index. This metric quantifies the differences between actual economic outcomes and projections. A positive number indicates that the economy is outperforming expectations.
When you overlay the Citi economic surprise index against the 13-week change in 10-year yields, a clear correlation emerges. When the economy outperforms predictions, yields tend to move in tandem.
This increase in yield represents a significant deviation from its nearly 3-decade trend. Broadly speaking, the Nasdaq 100 Index hasn't experienced such a pronounced change in yield trends since its inception.
On Volatility, Erik Norland from CME highlights an intriguing observation: the relationship between the yield curve slope and VIX when viewed from a 2-year average perspective. He suggests that equity volatility and the yield curve follow cyclical patterns, typified by specific periods:
1) Pre-Recession & Recession -Flat yield curve and high volatility
2) Early Recovery – Steep Yield Curve & High Volatility
3) Mid Expansion – Steep Yield Curve and Low Volatility
4) Late Expansion – Flat Yield Curve and Low Volatility
Plotted, the cycle looks like this for the 1990s period;
As well as the 2000s;
Given our current position in the Equity Volatility-Yield Curve cycle, we might be bracing for higher volatility ahead as we're likely situated near the cycle's bottom left quadrant.
If the trifecta of rising yields, waning AI hype, and a nascent high-volatility regime comes to fruition, then investing in tail hedges might be a savvy move.
One potential structure for a tail hedge could be the 1X2 ratio put spread. This strategy could offer protection against adverse market movements, with the flexibility to structure it so that initial costs could be negligible or even result in a net credit. Additionally, the put ratio is typically a long vega strategy, which could be beneficial in a high-volatility environment.
The 1X2 ratio put spread can be set up by taking 2 positions,
1) A short position on the Nasdaq 100 Index Futures with a strike price below the current level
2) A long position on 2 Nasdaq 100 Index Futures with a strike price further below the short option strike
At the current index level for the Nasdaq 100 Futures March 2024 contract of 15,520, we could take a short position on the March 2024 put option with a strike price of 14,800 at 304.25 points credit and 2 long positions on the March 2024 put option with a strike price of 13,800 at 122.5 points debit. The setup cost of the put ratio is 304.25 – (2 * 122.5) = 59.25 points, resulting in a net credit. The maximum loss occurs when the underlying asset settles at 13,800 by option expiry, leading to a potential maximum loss calculated as follows:
Long put options both expire worthless: -122.5 * 2 = -245 points
Short put option: 13,800 – 14,800 = -1000 + 304.25 = -695.75 points
Maximum loss = 940.75 points
Considering the potential for loss and the associated risks, several profit scenarios emerge. If, as we discussed, the yield trend shifts and the AI hype subsides, the Nasdaq could potentially plummet. If the Nasdaq falls beyond the 13,104 level by option expiry, the strategy could be profitable. Conversely, if the Nasdaq remains range-bound at its current level or rises by expiry, we could also benefit from the initial credit received. Each 0.25 index point is equivalent to $5.
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.yardeni.com
www.cmegroup.com
www.cmegroup.com
TNote (US10Y) entering target area, expecting a pullbackThe TNote (US 10 year yield) has entered its target area for this up movement from the bottom.
Resistance area is between 4.65% to 5%.
We are expecting a pullback below 4% for the next months.
Then the uptrend should resume towards 7%, possibly higher.
A break above 5% would invalidate this view.
Rising Yields Making a Rebound Less LikelyS&P 500 INDEX MODEL TRADING PLANS for TUE. 10/03
Since our published trading plans two weeks ago pointing out that week's 4505 level as potential top for the near term, the market has been in a free fall mode. Our models indicate 4310 as the level to close above for the current bearish bias to be negated.
The "higher for longer" monetary policy is yet to begin showing its impact on business earnings, and it could take one to two quarters more for us to see the earnings impact - and, hence the analyst forward estimates - which could have some more impact on the market multiples in the short-to-medium term. But, the near term bias will be determined by today's daily close as specified above.
Aggressive, Intraday Trading Plans:
For today, our aggressive intraday models indicate going long on a break above 4310, 4300, 4281, 4373, or 4260 with a 9-point trailing stop, and going short on a break below 4297, 4280, 4264, or 4257 with a 9-point trailing stop.
Models indicate explicit long exits on a break below 4314 or 4288, and explicit short exits on a break above 4265. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 10:01am EST or later.
By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention).
To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals.
(WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)
NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS:
(i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s).
(ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors.
(iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk.
#spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #softlanding, #higher4longer, #higherforlonger
The DXY and Yields are Still Set Up for a Bullish ReversalLast night, the DXY went below the PCZ of the Bullish Alt-Bat and bottomed out at the Demand Line of the channel it has been trading within, and at the same time, it formed a Bullish Butterfly with double PPO confirmation. Now it is back above the Moving Averages and on the rise. Meanwhile, the yields have seemingly bottomed out at the 200 SMA at the PCZ of a Bullish Shark and looks to be ready to make some new highs.
The QQQ has been getting pumped a lot because of money flowing into big tech, so I have opted not to focus so much on trading against the QQQ and will instead shift my focus against the IWM via the 3x Inverse ETF $TZA. TZA is at the 200 moving average, aligning with the PCZ of a Bullish Deep Crab with some PPO Confirmation, I think this will make new highs soon. if the QQQ goes back below 360 then I will cosnider jumping back on the Bearish QQQ trade.
EURUSD: Bearish Bat with MACD Bearish DivergenceWe have an Intraday Bearish Bat on the Euro with Bearish PPO Confirmation and MACD Bearish Divergence.
Earlier today, the Euro Doubled Bottomed at $1.05 and has since been on the rise, but so far it has only managed to come back up towards the moving averages and move up to complete a Bearish Bat. Now it is showing multiple signs of coming back down, and if it does, I don't think $1.05 will hold but that it will instead break and make its way towards $1.035. I think we will continue this trend until the Euro Is Back Below A Dollar.
The DXY and Yields are Set up to Make a Midday ReversalThe DXY and the 30 Year Yield have been on the decline for most of the day but are now showing signs of reversing back up at the PCZ of a Bullish Bat and a Bullish Shark in the form of MACD Bullish Divergence and PPO Confirmation, respectively.
When these two start to rise again it is very likely that the QQQ start to continue down as it is trading at the PCZ of a Bearish Deep Crab and has formed Potential MACD Hidden Bearish Divergence and if it starts to go down it will also give us Bearish PPO Confirmation which from there may result in a fast move down to make a lower low.
All of this will likely be triggered by whatever the Fed has to say today.
US 10 Year Yield - hitting resistanceYields Surging on the long end. Hitting resistance.
Will this level hold and give the equity markets a breather to bounce?
If this continues to surge you will see a massive selloff in equities at some point as the bond market is pricing in entrenched inflation.
DXY Parabolic RiseThe Dollar is surging and gaining strength like it did in 2021/2022 when inflation narrative dominated the market.
Are we witnessing inflation resurgence.
This Multi crossover of the daily moving averages suggests a very strong trend is forming, but this rise in price action often yields a pullback before the next leg higher.
Think about why this is happening...Yields surging, Inflation and China (Evergrande) uncertainty.
S&P500 holding supportThe S&P500 was shaky today after some deep selling started to occur. The market was breaking down on surging yields and dollar.
The SPY pierced and almost lost support but managed to find its footing late in the session & had a phenomenal rally which definitely consisted of Short covering based on the volume.
Let's see if this local low / bottoming tail will hold.
I expect if we see a retrace many investors will be trying to buy keeping a close stop against the wick low.
Why we’re watching the Bond/Equity Volatility
With the action-packed week of global central bank meetings for September now behind us, we believe it's an appropriate time to review where we stand. The current phase, in our view, can be aptly summarized by the words of Huw Pill, the Bank of England’s Chief Economist: a ‘Table Mountain’ scenario rather than a ‘Matterhorn.’ Recent announcements have positioned the Swiss National Bank, the Bank of England, and the Federal Reserve as adopting a pause stance. Meanwhile, the ECB suggests that it is in the final stages of its hiking program, and Sweden’s Riksbank has just executed its final hike. While we remain slightly skeptical that these hikes may indeed be the final ones, let's entertain this thought and examine what transpires during periods of a defined pause.
Defined pause periods raise alerts for us, as highlighted in our previous piece on US Equities. In that article, we pointed out the impact of a Fed pause, as it has often preceded periods of equity drawdowns. This pattern becomes even more evident when we consider other variables like shifts in the dollar and interest rates.
Looking at the S&P 500 index —in 2000 and 2006—where a clear pause was observed, significant equity drawdowns followed thereafter.
Furthermore, the 10-Year, 2-Year, and 3-Month yields have just reached their highest levels since October 2007, June 2007, and January 2001, respectively. These yields mark the highest nominal interest rates seen in decades across the interest rate curve.
More significantly, this shift has brought real yields back to positive levels, something investors haven't seen for a while, all while the yield curve inverts to unprecedented levels. All of these factors have spill-over effects on investors accustomed to decades of low real interest rates.
Another observation worth noting is that the ratio of Bond to Equity volatility has proven to be a reliable indicator for predicting the next market regime. For instance, during the 2008 period, a break in this ratio was followed by significant moves lower in the market.
A similar phenomenon was observed in 2019, where a sharp break in the ratio of MOVE to VIX preceded the market's next downturn. What captures our interest now is a recent, significant break in this ratio, reinforcing our bearish outlook on equities.
In terms of daily charts, the recent gap down places the index at a precarious juncture as it grapples with both a sharp break of the 100-day moving average and trend support. Compared to the last two instances when the index broke lower, the current RSI stands at even lower levels. Adding to this, only 18% of S&P 500 stocks currently trade above their 50-day moving average.
Given the breakdown in the MOVE/VIX ratio, the global pause in interest rate policy, and supporting technical indicators, we are inclined to maintain a bearish stance on US equities. We can express this view via a short position on the CME E-mini S&P 500 Futures at the current level of 4347, with the take profit at 3800 and stop at 4500. Each 0.25 point move in the E-MINI S&P500 index Futures is equal to $12.5. We can also express this same view with the CME Micro E-mini S&P 500 Index. With each 0.25 point move equating to $1.25, its smaller tick size compared to the standard contract offers greater flexibility in position-building or averaging your entries.
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
XLRE - Bearish BreakdownReal Estate looks to be in for a bumpy ride.
this ETF has just triggered a massive breakdown that suggest much more downside.
Why is real estate so weak? 2 words...Rising Yields.
XLE - true breakout or fakeout?Oil has been ripping lately and trying to establish a new consolidation range. Keep in mind this rally in energy has occurred as the DXY has had 9 weeks of consecutive upside.
The energy sector has been a bullish piece of the market and is at a critical support level.
If this breakout in XLE is to hold we could see some significant upside.
A weekly & daily breakout has been confirmed but when you zoom out to the monthly chart this could be signalling a failed Double top reversal.
Seeing how XLE closes the monthly candle will be telling for the market as oil has been the main increase in the CPI and inflation expectations.
Dollar and Yield Favored Setup Leading to the FOMCThe Dollar and US treasury Yields are all showing signs of future strength leading to the FOMC meeting, as the EURUSD has slammed into Resistance with Bearish Divergence and PPO Confirmation, the Yields have hit a Shark PCZ with PPO Confirmation, and XAUUSD has once again hit the PCZ of a Bearish ABCD and will give us PPO Confirmation of a Type 2 Reversal once, and if it starts going down again.
Market Analysis Ahead of Fed MeetingThe FOMC is set to have their 2 day meeting.
Market consensus is for a pause in rate hikes.
Will the Fed shock the market like the ECB just did with their rate hike?
The treasury yields market is still in a very strong uptrend & inflation expectations over the last 2 CPI prints have come in hotter due to energy.
the markets are in a ver y precarious spot with the small caps & equal weight indices on the verge of breaking down. Will tech save the day?
inflation & yieldsThe Us 10 Year yield is one of the most important yields to follow.
It greatly impacts long term investment decisions in a vast array of markets; stocks, bonds, real estate.
A clear technical breakout is being observed & this could mean inflation is becoming entrenched.
Yields have a tendency to rally in parabolic fashion. if this breakout holds we can likely expect higher rates.
2 year yield - breakoutThe yield market is going absolutely bonkers tonight in the futures.
What is the bond market telling us?
likely inflation is entrenched. If the 2 year yield closes at or above the Fed Fund Rate before we hear from Powell expect the fed to do a surprise rate hike or remain extremely hawkish.
This will no be good for stocks if this is the case.
SMH: Are semis breaking down?Last time we saw the bullish moving average cross of the 7MA & the 590 MA we saw a superb rally over 2.5months.
This time we are seeing a bearish cross of the same 2 moving averages. Could this replicate the move to the downside?
Don't say we didn't caution you!
SPY / SPX at an inflection pointThe S&P500 is on the verge of breaking down very hard.
If we reject at the neckline tomorrow that is bearish.
If we close above the neckline it is bullish.
Either way a big move should occur once we know where we close.
After a hotter than expected CPI, tomorrows PPI will be telling.
If we get a hot PPI and hot Initial Jobless claims number expect markets to sell off.
Trading Plans for THU. 09/07 - Back to the BasicsS&P 500 INDEX MODEL TRADING PLANS for THU. 09/07
As we wrote in our trading plans published yesterday, Wed. 09/06: "In this morning's session so far, markets continue to be listless with the bias sliding towards mildly bearish. Nevertheless, bears need to wait for a confirmation before taking any positional shorts - a daily close below 4450 today might give that confirmation".
The index failed to close below 4450 yesterday, but showed continued weakness. The price action in the pre-market session after the Initial Jobless Claims is showing the potential for further weakness to develop. The retail positioning and the retail sentiment reinforce our view for a downward push to follow in the coming days. Rising yields are renewed concern for the bulls.
Our models are sporting outright bearish bias for positional trades while the index is below 4470. The index has to close above 4507 for our models to abandon the bearish bias.
Aggressive, Intraday Trading Plans:
For today, our aggressive intraday models indicate going long on a break above 4490, 4472, 4445, or 4419 with an 8-point trailing stop, and going short on a break below 4488, 4468, 4457, 4442, or 4415 with a 9-point trailing stop.
Models indicate explicit short exits on a break above 4459. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 09:31am EST or later.
By definition the intraday models do not hold any positions overnight - the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform's bar timing convention).
To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) - depending on your risk tolerance and trading style - to determine the signals.
(WHAT IS THE CREDIBILITY and the PERFORMANCE OF OUR MODEL TRADING PLANS over the LAST WEEK, LAST MONTH, LAST YEAR? Please check for yourself how our pre-published model trades have performed so far! Seeing is believing!)
NOTES - HOW TO INTERPRET/USE THESE TRADING PLANS:
(i) The trading levels identified are derived from our A.I. Powered Quant Models. Depending on the market conditions, these may or may not correspond to any specific indicator(s).
(ii) These trading plans may be used to trade in any instrument that tracks the S&P 500 Index (e.g., ETFs such as SPY, derivatives such as futures and options on futures, and SPX options), triggered by the price levels in the Index. The results of these indicated trades would vary widely depending on the timeframe you use (tick chart, 1 minute, or 5 minute, or 15 minute or 60 minute etc.), the quality of your broker's execution, any slippages, your trading commissions and many other factors.
(iii) These are NOT trading recommendations for any individual(s) and may or may not be suitable to your own financial objectives and risk tolerance - USE these ONLY as educational tools to inform and educate your own trading decisions, at your own risk.
#spx, #spx500, #spy, #sp500, #esmini, #indextrading, #daytrading, #models, #tradingplans, #outlook, #economy, #bear, #yields, #stocks, #futures, #inflation, #recession, #softlanding, #risingyields, #initialjoblessclaims
This chart pattern suggests yields are going higherUS10Y remains in an established uptrend on the daily chart, and Friday's bullish engulfing candle suggests a swing low has formed and more gains are to follow.
But having looked back at price action since the April low, we note that prices are yet to break the low of a bullish engulfing candle if it has formed after a pullback or period of consolidation. Granted, there are one or two of those engulfing candles that do not fit the exact description (as an open or close is out be a few ticks, meaning it has not truly engulfed). But we've relaxed the rules to note bullish candles that show clear range expansion over the prior candle.
And if that pattern persists, it looks like the 10-year yield (and likely yields across the curve) are at least going to make an attempt to retest or break their cycle highs.
