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Modeling a shift in SRAS and AD over the past year, I think. I used the U.S PCE YoY as the base, I then overlaid the M1 YoY and Real GDP YoY. I used the beginning of this years as a reference point as that is roughly when the fed began increasing interest rates. As the price level declines demonstrated by a decline in the money supply and PCE YoY declining Real GDP YoY is seen increasing To my understanding this visualizes how SRAS and AD have shifted to the left over the past year
ECONOMICS:USPCEPIACEducation
by MostlyFXcharts
Macro Monday 19~Nonfarm Payrolls Macro Monday 19 Total Non-Farm Payrolls: Pre-Recession Observations What is Non-Farm Payroll? The nonfarm payroll measures the number of workers in the U.S. includes 80% of US workers. The figures exclude farm workers (Nonfarm) and workers in several other job classifications such as military and non-profit employees. Data on nonfarm payrolls is collected by the Bureau of Labor Statistics (BLS) and it is included in the monthly Employment Situation report (the “Employment Report”) which includes two surveys, the Household Survey, and the Establishment Survey. Nonfarm Payroll is included in the latter the Establishment Survey. The Establishment Survey gathers data from approximately 122,000 nonfarm businesses and government agencies for some 666,000 work sites and about one-third of all payroll workers. Anyone on the payroll of a surveyed business during that reference week, including part-time workers and those on paid leave, is included in the count used to produce an estimate of total U.S. nonfarm payrolls The Full Employment Report is released by the BLS on the first Friday of each month at 8:30 AM ET and reflects the previous month's data. The Chart ▫️ The Chart highlights the last four recessions (red shaded areas) ▫️ The aim of the chart is to identify what Non-Farm Payroll movement occurred prior to each recession (in the blue shaded areas) so that we create a gauge that identifies the early warning signals of such recessions. ▫️ From reviewing the data (illustrated in the data chart), prior to each recession there was a either a confirmed decline in Non-Farm Payrolls prior to recession or an increase of less than 0.0300 mln in Non-Farm Payrolls prior to recession (a tapering off or sideways move). This was evident prior to all four recessions reviewed. Main Findings: 1. The four most recent recessions all seen a decline in Non-Farm Payrolls prior to recession or an increase of less than 0.030 mln in Non-Farm Payrolls prior to recession (the “Signal”). Advance notice of recession was 1 to 12 months depending on recession (final column) 2. Currently we do not have a decline or an increase of less than 0.030 mln in Non-Farm Payrolls thus suggesting we do not have an advance recession warning triggering at present. 3. From a review of the data chart we are now aware that a pre-recession signal can trigger and provide us with 1 months advance notice or 12 months advance notice. In the event the parameters of number 1 above are met to provide a Signal, we can then add this chart/metric as a recession warning chart. Breakdown of Each Recession Signal (signal defined in 1 above): ▫️ The 1990 recession gave us a 1 month advance warning of recession. ▫️ The 2000 recession provided 2 advance warnings (2 & 3 in the chart), one signal gave us a 9 month heads up and the other a 3 month advance notice. ▫️ Similarly, the GFC 2007 recession provided 2 advance warnings (4 & 5 in the chart), one gave us 5 month advance warning, and the second was the signal the recession had started. ▫️ COVID-19 provided a 12 month advance warning with a decline registered from Jan – Feb in 2019. Side Note: Interestingly this has some alignment with last week’s chart on Durable goods. In Feb 2019 one year before the COVID-19 Crash the Durable Goods Moving Average provided an advanced sell/recession signal, and whilst the S&P500 did rally c.13.5% after the signal over the subsequent 12 months, the S&P500 ultimately fell 23% thereafter in a matter of months taking back all those gains and more. Durable Goods is also included in the Establishment Survey so maybe it should come as no surprise that we have synchronicity between both charts on the COVID Crash. The Durable goods chart is also not presently signaling a recession similar to this Nonfarm payroll chart. Both charts appear to demonstrate some resiliency in the employment market (echoing Jerome Powell's sentiment that Employment is tight). False Signals ▫️ Unfortunately there are a number of false signals throughout the chart whereby a decline in payrolls or an increase of less than 0.0300 mln is observed with no follow up recession however most of these false signals are either 1 month in duration or happened in the direct follow up years after the recession slump (when a recession is no longer of concern). Regardless, for this reason the Non-Farm Payrolls Recession Signal cannot be utilized as a standalone indicator, we need other charts and data to help identify the risk of recession. ▫️ Other data should be utilized in conjunction with Non-Farm Payrolls such as the following closely aligned charts all of which are show concerning pre-recession patterns in one way or another; 1. Total Non-Farm Layoffs and Discharges 2. Total Nonfarm Job Openings 3. US Continuing Jobless Claims 1. Total Non-Farm Layoffs and Discharges is signaling a similar trend to the 2007 Great Financial Crisis were there was an initial increase of c.450k (up to the first peak) and eventually a total increase of c.885k from lows to peak recession high. - At present we are trending upwards and had an initial peak of c.507k (it could be the only peak or the initial peak, time will tell). 2. Total Nonfarm Job Openings is signaling a significant decline in job openings much larger than the prior two instances where job opening declines led to recession. - A quick glance at the chart and you can see that we have exceeded the typically level required for recession and exceeded the typical timeframe (using GFC and COVID as reference points). 3. US Continuing Jobless Claims -Prior to the last 8 recessions the average increase in cont. claims was a 424k increase over an average timeframe of 11 months. - Since Sept 2022 Cont. Claims have increased from c.1.3m to 1.818m (an increase of c.518k over a 13.5 month period). We are above both pre-recession averages number of increase and time. In summary: ▫️ Last week’s Durable Goods Chart and this week’s Nonfarm payrolls chart are not triggering a recession warning at present. Both charts appear to emphasize a resilient labor market. ▫️ In stark contrast all three of the additional charts I provided above are incredibly concerning on the recession probability front. In particular Cont. claims , the most concerning of the bunch, is surpassing all pre-recession averages, highlighting that people are finding it harder to recover from a job loss and find a new job. This chart alone would suggest that the labor market is beginning to significantly soften. ▫️ Over the past week we have also had an update to the Purchaser Managers Index which declined further into contractionary territory from 49.0 to 46.7 (est. 49.0). Another signal towards a softening labor market. ▫️ It would be remiss of me not mention that I have seen a Month Over Month (MoM) Chart of the Nonfarm payrolls doing the rounds and it appears to illustrate a softening and slowing of labor conditions (will share in the comments). Such a trend could translate to a gradual tapering and/or decline on our monthly Nonfarm chart over time. When you consider all of the above, you would have to expect a market decline is around the corner but also expect some continued lag before we see it due to those few charts that are not even showing the pre-recession signals, never mind an actual recession signal. The charts holding out are Durable Goods, Nonfarm Payrolls and ill throw in Major Market Index TVC:XMI as a complimentary chart that has not lost its support as of yet. We are also aware that the Dow Theory has confirmed a bear market and has been expecting a market rally before bear trend continuation (the sell into rally). All the same these moving parts can change and pivot so we have to keep an open mind but its hard not to lean very cautiously as it stands. We can keep an eye on these final charts that remain defiant as they may be the final strongholds and provide us with the final warnings in the event of.... As always folks stay nimble out there PUKA
FRED:PAYEMS
by PukaCharts
Are we in a recession? (spoiler: no)I wanted to aggregate some of the things that the NBER considers when determining a recession, and provide three links that people can follow to monitor for recession likelihood. The NBER uses lagging data so they officially declare recessions after they've been under way for some time and sometimes at their conclusion. However, we can monitor the data points that they consider to view whether they are expanding or contracting. I've included: Non-farm payrolls Consumption Household employment Real GDP Gross industrial output Real personal income less transfer payments You can see that, despite the rightening monetary conditions, real economic variables continue to expand. I've also included the Sahm Recession indicator by WeatherUmrella. This uses a 0.5 increase in unemployment over 3 months to indicate that a recession is underway. www.tradingview.com Links: I'll keep this chart public (hopefully it's helpful). www.tradingview.com Sahm Rule official at the Federal Reserve fred.stlouisfed.org Smoothed probability of recession fred.stlouisfed.org The last uses the same criteria as the NBER, using some matrix algebra to use what's available to extrapolate a real time determination. It's been very accurate.
FRED:NPPTTL
by Ben_1148x2
🔥 The Number 1 Recession Indicator Signals Great Danger 🚨 The Sahm Rule Recession Indicator (white) is on the rise. Historically, a rise in this indicator has always signaled a recession and a corresponding fall in asset prices. How it's calculated: "The Sahm Rule identifies signals related to the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to its low during the previous 12 months." In other words, once unemployment starts to rise quickly, this indicator moves up and a recession is on the horizon. Since it's inception in the 1950's, every time this indicator reaches above 0.3, the trend seems to be irreversible and only reverses back after the recession is "over". See the orange line for the performance of the SP500: it has an inverse relationship with the SAHM indicator. Keep a close eye on this indicator. Seeing how fast it's rising, there's historically a huge probability that the US economy will see a recession somewhere in the next few months. Keep an eye out for bearish price action in stocks and crypto during this time.
FRED:SAHMCURRENTShort
by FieryTrading
30
The Bank of Japan can’t let goThis week financial markets were dominated by central banks policy decisions. While the Federal Reserve (Fed) and Bank of England (BOE) kept rates on hold, the policy board of the Bank of Japan (BOJ) decided to further increase the flexibility in its yield curve control policy. The BOJ previously set a strict cap of 1.0% for the 10-year Japanese Government Bond (JGB) yield. But it has now decided that 1% should be a “reference” (not a strict cap), which effectively allows the yield to rise above 1% when the BOJ thinks it is appropriate. The upper bound of 1% appears to be a level they can’t let go of. By doing so, the BOJ is choosing an exit path that gives them the maximum flexibility but minimum volatility around the Yen. We view this as a dovish move as consensus expectations were for the BOJ to move the cap to 1.25% rather than 1%. Japan’s remains on a narrow path One of the reasons holding back the BOJ from normalisation of policy rates, is they still believe Japan’s recovery since the re-opening in October 2022 remains on a narrow path as it relies heavily on tourism, while the broader services sectors have yet to pick up significantly and manufacturing activity has been hampered by soft exports. Japan’s flash PMI readings for October showed us a bifurcated economy where the services sector is stronger than the manufacturing sector. Manufacturing PMI clocked in at 47.6, which is in contraction territory. Services PMI was 51.1, which is down from last month’s reading of 53.8 but is still in expansion territory, no doubt helped by fiscal stimulus and the accommodative monetary policy environment. BOJ on the lookout for an intensified virtuous cycle between wages and prices BOJ governor Ueda indicated that the BoJ will be monitoring the upcoming spring union-employer wage negotiations. A strong outcome could catalyse the earlier attainment of sustained inflation in Japan, but overall, Japan’s recovery isn’t strong enough yet for employers, especially small enterprises, to meaningful support wage hikes in the broad economy. While headline inflation bolted north of 4% in January 2023, it appears to have peaked and has begun receding. While core inflation remains around the 4% mark. The Producer Price Index (PPI) slowed to 2% annually in September suggesting a stabilization or even drop in CPI ahead. The BOJ revised its outlook for core inflation (all items less fresh food and energy) to 3.8% in FY23, 1.9% for FY24 and 1.9% for FY25. The BoJ stated that the inflation uptick “needs to be accompanied by an intensified virtuous cycle between wages and prices”. The Yen is unlikely to appreciate under BOJ’s policy change owing to the large gap in interest rates between the US and Japan. The direction of the Yen matters for Japanese equities owing to Japan high export tilt. The exporters stand to benefit amidst a weaker Yen. Fire power abounds for Japanese equities Japanese equities had a strong first half in 2023, attaining 33-year highs. Yet valuations at 15.7x price to earnings ratio (P/E), still trade at a 30% discount to its 15-year average providing room to catch up. More importantly, earnings revision estimates in Japan are currently the highest among the major economies. Earnings yield at 4.07% for the Nikkei 225 Index has been trending above bond yields 0.947% for 10 Year JGBs , keeping the well-known TINA (There is no Alternative) trade alive in favour of Japanese equities. Tailwind from corporate governance reforms Tokyo Stock Exchange’s (TSE) call for listed companies to focus on achieving sustainable growth and enhancing corporate value is beginning to bear fruit. The call was aimed at companies with a price to book (P/B) ratio below one. Those companies were asked to develop a plan for improvement, disclose and then implement and track its progress. The progress has been encouraging with 31% of companies on the prime market making a disclosure of their plan . Large companies with a price to book ratio below one have been more proactive with disclosure. Historically cash-heavy Japanese companies face increasing pressure to improve their numbers, possibly by funnelling historically high excess cash reserves into increased buybacks or dividends. Conclusion Inflation has been missing in Japan for more than a decade. So now that it has arrived aided by the post pandemic pick up of the Japanese economy, policy makers are not in a rush to obliterate it. With wage growth lagging behind inflation, the Bank of Japan does not appear ready to wean itself from Yield Curve Control until a more intensified virtuous cycle is observed between wages and prices. The BOJ’s policy decision this week is unlikely to allow the appreciation of the Yen, which should continue to provide a competitive advantage to Japanese exporters. This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
ECONOMICS:JPIRYY
by aneekaguptaWTE
Labor and unemployment - an objective look at the dataIt's important to look at multiple data points in labor and consumer reporting before drawing conclusions. Be skeptical of any financial or social media presenting a single data point as something to be optimistic or pessimistic about. The chart covers comparative labor information: Job openings (blue) are coming down quickly, which we've heard a lot about. However, we don't hear many talking about how there are still 2MM more job openings than the pre-covid maximum. Participation (white) is increasing and coming close to recovering to a pre-covid level. Note that we haven't seen labor participation fully recover from the prior two recessions. Job openings (demand) should come down as participation (supply) increases, bringing them close to equilibrium Unemployment (red) remains near a historic low USCJC Continuing and initial jobless claims have increased slightly, but are still below recessionary levels. These will increase as more participants compete for positions. USJO Job offers (green) and USJQ job quits (red) are each coming down, but remain very high. This is also consistent with more participation in the labor force. Permanent job losses (pink) have ticked up, but remain low. This is an important metric to keep an eye on.
FRED:JTSJOL
by Ben_1148x2
Consumer income, spending, and borrowingIt's important to look at multiple data points in labor and consumer reporting before drawing conclusions. Be skeptical of any financial or social media presenting a single data point as something to be optimistic or pessimistic about. This chart reviews income, spending, and borrowing data: M2 money supply (bright green) is included so that we can visualize increases in other metrics with the increase in the supply of funds to the economy RPI real personal income (blue) and DSPI (yellow) real disposable income have some wild swings 2020-2021. This is logical given the wage competition required to hire when the participation rate is very low. RPI has flattened and the most recent disposable income figure is down sightly. USPS Personal savings (green) is coming down at a pace that is visually similar to the increase in participation. USPSP Personal spending (red) is a volatile figure that is starting to become consistent with historical trend. All consumer loans (purple) and all credit card loans (light purple) are increasing. Note the rates of change in the pane below compare the rate of change for consumer borrowing to that of real personal income. Income had a steeper upward rate of change and the rate of change for borrowing has been declining. Both are coming in line with one another. The last pane covers all delinquencies (red), credit card delinquencies (pink), and real estate secured delinquencies (white). We've heard about a lot about credit card delinquencies having an alarming rate of change. This is confirmed with the addition of a pink rate of change in the pane above. While a continued rate of change from 2021-2022 would not be sustainable long-term, credit card delinquency totals are now in a normal pre-covid range. Additionally, they are still relatively low when compared to the growth in card balances and growth in money supply.
FRED:RPI
by Ben_1148x2
Macro Monday 18~Durable Goods SignalsMacro Monday 18 Using New Orders for Durable Goods to Anticipate Market Direction This week we are using the Manufacturers New Orders for Durable Goods Survey data (“Durable Goods”) to help anticipate price movements on the S&P500. The 30 month moving average for Durable Goods can act as a threshold level for buy and sell signals for the S&P500 whilst also providing advance warnings of recession and/or capitulation events. This has been clearly illustrated in the chart. Durable Goods Explained Durable goods orders is a broad-based monthly survey conducted by the U.S. Census Bureau that measures current industrial activity which proves to be is useful as an economic indicator for investors. Durable goods orders reflect new orders placed with domestic manufacturers for delivery of long-lasting manufactured goods (durable goods) in the near term or future. A high durable goods number indicates an economy on the upswing while a low number indicates a downward trajectory. Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and provide more insight into the supply chain than most indicators. This can be especially useful in helping investors understand the earnings in industries such as machinery, technology manufacturing, and transportation. What’s Included in Durable Goods? Durable goods are expensive items that last three years or more. As a result, companies purchase them infrequently. Examples include machinery and equipment, such as computer equipment, industrial machinery, and raw steel, as well as more expensive items, such as steam shovels, tanks, and airplanes—commercial planes make up a significant component of durable goods for the U.S. economy. Many analysts will look at durable goods orders, excluding the defense and transportation sectors as large once off orders can often skew the figures. Durable goods orders data can often be volatile and revisions are not uncommon, so investors and analysts typically use several months of averages instead of relying too heavily on the data of a single month. In our chart we have found the 30 month moving average to be particularly apt as a threshold level The Chart In the chart we have the Durable Orders metric in blue and the S&P500 in baby blue. The 30 month moving average on Durable Goods (Dark Brown Line) is used as a threshold level for buy and sell signals. When the blue line for new orders of Durable Goods definitively passes the 30 month moving average (Dark Brown Line) this provides the buy or sell signal based on whether it moves above or below the average. Main Findings 1. When Durable Goods Orders(blue) fall below the 30 month moving average(brown) this is sell signal 2. When Durable Goods Orders(blue) break above the 30 month moving average(brown) this is a buy signal 3. Declining durable goods and/or a fall below the 30 month moving average has offered advanced warning of recession and/or capitulation. Sell Signal Record (Blue line crossing below Dark Brown Line) ▫️ In Oct 2000 five months before the Dot.Com Crash which commenced in Mar 2001, the Durable Goods Moving Average provided a sell signal offering an five month advanced warning of recession. ▫️ In Dec 2007 the Great Financial Crisis (“GFC”) commenced and whilst New Orders for Durable Goods had not passed below the moving average before the recession it did pass the moving average mid recession signalling an advance warning of the major capitulation event of the GFC crash. Once again Durable Goods was of great utility in avoiding unnecessary losses. ▫️ A sell signal triggered in Oct 2014 and whilst there was no crash, the S&P500 price oscillated sideways for >24 months post signal and only increased in value by 9%. During this 24 month period capital would have been better allocated somewhere offering a better than 9% return. ▫️ In Feb 2019 one year before the COVID-19 Crash the Durable Goods Moving Average provided an advanced sell/recession signal, and whilst the S&P500 did rally c.13.5% after the signal over the subsequent 12 months, the S&P500 ultimately fell 23% thereafter in a matter of months taking back all those gains and more. Buy Signal Record (Blue line crossing above Dark Brown Line) ▫️ As you can see from the chart the buy signals provide a great confirmation of trend, that price on the S&P500 will likely continue in an upwards trajectory. ▫️ For the four buy signals confirmed we had 50 months of upwards price pressure on the S&P500 on the first two occasions and on the latter two 18 months and 15 months of upwards price action. ▫️ Taking the four aforementioned buy signals, an the average return was 60.5% f(max return possible from a buy signal the market high). ▫️ The performance from a buy signal to sell signal was an average of 43% across the four instances. The chart demonstrates that using the 30 month moving average for Durable Goods New Orders can very useful in determining market trend. At present we are well above the 30 month moving average and appear to be trending upwards. We can continue to monitor this chart and watch for a cross of the 30 month moving average as an additional confirmation of a change to a bearish trend for the S&P500 when it happens. For now this is just another chart to help us identify bearish/bullish trend changes by using the economic data from Manufacturers New Orders for Durable Goods. As always folks, stay nimble PUKA
FRED:DGORDER
by PukaCharts
USCCI - Consumer Confidence Index - Recession is HereThe US Consumer Confidence Index (USCCI) does not look so good. Consumers (normal people) are feeling anxious about their future, and they have good reasons for that. The Bull Market did not last long after the Covid Pandemic and people don't feel optimistic about their future spending or wealth. If you don't know what the CCI is, no worries, I will briefly explain, so that a 12 year old will know. A very well-known university in Michigan started doing some surveys a long time ago. They were asking people how they feel about their future, about their spending confidence, etc. Basically, you can also ask yourself: Can you afford a new car now? Are you making more money now then you were 2 years ago? Do you have financial stability? How do you feel about that? Are you thinking of moving into a new, nicer home? For me it's a NO for most questions above. Not sure about you... Now, if I may continue, I will tell you this: people are scared. In fact, Covid shocked the world as we know it. We got used to being bullied by the higher, running forces in the world. Anyway, there are many factors for which Consumers are pessimistic at these times: - War & Tensions: Ukraine vs. Russia - Inflation Spike - Energy Crisis - Federal Reserve (FED) Interest Rate Hike - Surging Prices - Bear Market Fears - Recession Talks Remember this: WINTER IS COMING! No joke, many will suffer. The media plays a major role with inflicting sentiments in your mind. As for me, I'm more of a technical guy, so I go with what my technical analysis tells me. Until now I mentioned my personal fundamental analysis take. I'm not optimistic about the markets. The FED messed it all up. They overreacted with that Quantitative Easing (QE). Artificial (fake & printed) money was injected, and of course it lost its value. Because of that, Inflation skyrocketed, and of course they're surprised. NO! It's the oldest trick in the book. They are controlling the global economy. It's actually them who are causing inflation or stagflation, and also them who are switching bullish and bearish gears. But enough about that. I'm gonna' switch to the Technical Side. I just wanted to get that off my chest. LOL So, I'm an Elliottician. That means I trade by using the Elliott Wave Theory. It proven to me over the years that it works. The Market's price movements are simply suman beings buy & sell emotions, as a herd. Yeah, they're all sheep, and most indicators are based those herd emotions. So, on this USCCI chart, which is coming from 1953, I'm labeling my Elliott Wave Count. What I see is a Triple Three Complex Correction, in a very BIG degree. TradingView calls it: Elliott Triple Combo Wave (WXYXZ). Based on that Wave Count, I am suspecting more down-side to this chart. In a nutshell, I'm anticipating a RECESSION. How big it will be and how long it will last, that depends. For what I know, the Bear Market has already started for Indices globally. My VIX (Volatility Index) idea backs this up. Short and simple: the USCCI would tag the 61.8% Fibonacci Retracement of Wave A (white). That's a point of interest for bulls, because it reflects the Golden Ratio. If it breaches and goes lower than that, then it's not just a Recession anymore, it's gonna' be more like a Depression. 1929 all over again. Funny how these Cycles come into play... My chart has labels and infographic stuff. Write a comment if you want, give a like if you give a :poop: :D Good luck!
ECONOMICS:USCCI
by EW4X
5
World Wars & US Inflation From 1914This is the US Inflation Rate (YoY) from 1914 until 2022. Symbol is called USIRYY and it measures the Inflation Volatility in the United States. With the War going on in Ukraine, and Russia trying to force its way through, I took the liberty of looking into the following: - How Global Wars Affect Inflation - How US Inflation Reacts to External Wars - How Wars Affect the Financial Markets You can see the time-lines, it's all laid-out in the chart (graph). I took all the Major World Wars and events that significantly affected, not only the US Inflation, but Inflation itself. First of all, the US Inflation Rate (USIRYY) tells me the following: * When the US was involved in a War, we can notice that the US Inflation spiked. * Most of the times when US was not involved in an External War, then Inflation dropped. That's because of War & Uncertainty Sentiment around this "terrific" word. War does not bring anything good, in fact, in only brings bad times. People die and global sentiment gets super-negative. This of course, leads to... you guessed it: Market Crash. Why? Because after or during times of War, there are Recessions and Depressions. Supply Chains are disrupted and the Global Economy falls on its face. What about looking at things from a Technical Analysis perspective? * Symmetrical Triangle: and the only way is UP! I will give you points which I believe are worth keeping in mind for the next Market Crash. First of all, let's be logical about this. Winter is coming and it's only gonna get worse before it gets better. As Inflation spiked to a 40y high, the higher powers intervened, in an attempt to cool the Inflation spike off. I'm talking here about the Federal Reserve (FED) ramping up the Interest Rates. This is the Effective Federal Funds Rate (FEDFUNDS). Can you see the break-out? They want to calm down Inflation, but they can't. Why? Because this is no ordinary Inflationary period, it's a long-lasting thing. One of those hyperinflation, deflation, stagflation, or whatever the heck these experts call it... :) The Volatility Index (VIX) tells me that another spike in Fear Sentiment is inevitable. I'm in love with Elliott Wave Analysis, so I labeled this next chart. This is the United States Consumer Confidence Index (USCCI) and it measures exactly what its name says, LOL. When it drops, people are freaking out. When it rises, people are optimistic and the Markets are going up. Daaaa! With all that said, what's the bottom line here? I believe that periods of terror are gonna hit us all. Are we having World War 3? Who the heck knows? All I know is that there are more pieces to this puzzle: United States 10Y Bonds (USB10YUSD) have reached the Support, and a spike bigger than the Covid Pandemic has started: The 10Y Treasury Note Yield (TNX) have broken out of a 40y down-trend: Isn't it ironic how it synced with the Inflation 40y high? Damn! Germany 40 (DAX, GER30, GRXEUR) is doomed. Fractal sequence, Descending Channel, and a "beautiful" ABC Elliott Wave Pattern. So, how can you prosper from all this? Metals could be a good hedge. Gold (XAUUSD) just broke out of an important Bearish Structure. Maybe it will go up. Natural Gas (NG1!) & Crude Oil (USOIL) however, are showing Bearish Reversals. Bitcoin (BTCUSD) is Bearish until further notice as well. But this may become the new currency moving forward. In times of terror, the banking systems might need to change. Cash and Card is so '00. WHAT'S YOUR TAKE? WAR OR PEACE? Leave your commend down below. Cheers! Richard
ECONOMICS:USIRYYEducation
by EW4X
5
USEHS: Existing home sales 2008 to 2023. Eerilly similar.Hi, I do not post as often as I'd like to, the market being bearish and not as fun as a bullish one. Was thinking it would be interesting to compare 2008 to 2023 Existing housing sales. The chart patterns are very similar, in form and timing. In 2008, crash came very close to the low in existing home sales. We are at that very specific point right now. Not saying a crash is going to happen. Just wondering if this indicator is worth anything. Remember, stay humble, have fun, make money. Maax
ECONOMICS:USEHSShort
by LeLaf
3
2024 = More Max Fear/Hope Cycles: global money supply to revealGeneral Bullish Decade. Monetary supply could signal market environment. Price action and trends may be muted in both directions while Monetary supply consolidates. If global liquidity reaches green have more confidence that trends sustain Otherwise expecting trends to be Isolated and short lived in both directions But Fear could be maximum providing buying opportunities for 2024 This could be considered a traders market, but most will likely get wrekt by buying tops and selling bottoms. if the general case is bullish, then accumulating and expecting dips while M2 consolidates could be a good general idea during 2024. How to Win? play for 2030. Extend time horizon
ECONOMICS:CNM2
by SnarkyPuppy
3
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
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. * * * 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.
FRED:M2SL
by SpyMasterTrades
46
US stocks to bonds in relation to FED interest rate & inflationPotential equity upside: uncertain. Potential equity downside: uncertain. FED is currently paused at 5.5% interest rates, and even if they did increase rates again like they did in 2000 after pausing at 5.5% from 1995-1998, a pivot to start decreasing rates is due in the coming years- continuing the long term stock/bond market cycle. 30 year bond yields at levels not seen since 2007…but still has 25% upside to reach levels of 1999. Going from current 5.08% to 6.43% where the 30 year yields peaked going into the tech bubble inflation era. That was FED interest rates at 5.5% from 1995-2000… FED pivot: certain. FED pivot time: uncertain Will inflation continue to run hot as tech gains continue? Or will crazy bond yields break the banks and they need a bailout amidst a prospective world war really putting FED in a pickle… How I’m going to position solely for a FED pivot: start buying bonds now as we are in the beginning of rates being paused (yellow arrow on chart) and risk off equity. I like cost averaging into TMF even if it ends up being for the next 5 years- in comparison to 1995-2000 inflation levels. That is why dca is very important and to not use funds needed for daily living. If that were the case, selling covered calls generates easy income and can add that profit to equity position to dca further. That is until FED interest rates start being lowered. At that point, hold the current average cost. That is shown on the chart as a red arrow down. Do not take profit until what is shown on the chart as a blue arrow, or when FED interest rates are paused while decreasing. The potential to miss equity upside is there up until the FED pivot. That, to me, is just what it is. Chasing equity high up until FED pivot. And I am not comfortable doing that with prospective world wars beginning involving USA. However, the potential for bond face value appreciating for years to come while inflation goes back down to 2% goal is far greater. The time that comes is just uncertain. But certainly, it will come. Dividend yields remain high until rates pivot down, so with this strategy, there’s fixed income along the way. And is intended from dca to never realize any loss. When US inflation rate is back below 2% target goal, whenever that is, start to add on equities. When FED interest rates start increasing again, sell all 20 year bonds and full risk on equities.
ECONOMICS:USINTR
by raylanboogie
Again macro conditions don't foretell a crash soonIn May and August I made posts saying "Macro conditions don't foretell a market crash soon." Time has passed and it's all pretty much the same. BUT!! Current world events might change everything. And see my other posts re likely imminent drops in the market. This post is just about macro. Once again, some points here looking back to 2001. (2020 was an irregular event). Sorry for all the colors here, but everything is connected. 1. The Fed Rate (FEDFUNDS dark purple) falls before unemployment rises and recession. Note that the market rose while the interest rate was at its peak in 2006-2007 and 2019. So a further interest rate rise in November shouldn't be a worry, not that it seems likely today looking at the CME Fedwatch Tool www.cmegroup.com 2. There are still more job openings than people to fill them (JTSJOL Non-Farm Job Openings minus USCJC US Continuing Jobless Claims - dark blue). Still unchanged since May. 3. Unemployment Rate (UNRATE dark gray) rises before SPX (yellow) drops. Currently UNRATE is up to 3.8% and unchanged August-September. Relatively static and close to multi-year lows. 4. Note that since May: * Initial Jobless Claims (USIJC light blue at the bottom) have dropped * Continuing Jobless Claims (USCJC light gray) are unchanged * Non-farm Payrolls (USNFP green) are unchanged * Job openings (JTSJOL light purple) fell slightly and rose back to the May level. At over 9m there are more available jobs that any time pre-COVID. * The number of Employed Persons (USEMP light pink) is rising continuously and is now at 161.5m - almost 3m more that pre-COVID. There's your economic growth. 5. After a year in decline, M2 Money Supply rose during the summer but might now be falling - a negative indicator? 6. The SPX drop last year was a result of inflation -> rate rises -> fear. But the recession didn't happen and the economy still looks strong Conclusion is that macro conditions still don't foretell a market crash in the immediate future. NOT TRADING ADVICE. DO YOUR OWN RESEARCH.
FRED:JTSJOL
by lavoriamo