Positive Rate of Change M2 in a Fed cutting period = GOLD higher
A Positive Rate of Change in M2 during a Fed cutting period = GOLD higher.
Economy
SPX direction after first and last FED rate cutsThis chart compares FED rate cuts to SPX chart.
The last 3 times after the first rate cuts there was a slight upward rally of the SP500 of about 5-10%, before going on a bearish retrace of about -40%, -50% & -20%, and then bottoming out only AFTER the final rate cut.
Based on this, if history repeats, there might be a year end upward movement in the stock market, perhaps followed by a retrace through 2025 until the final rate cut. And then massively up from there again.
The last 3 times rate cuts did not mean sp500 starts going up immediately. There was a retrace instead. SP500 went up only AFTER the final rate cut.
Yield Curve Reversion Trade 2024The yield curve reversion is when the US10Y Treasury Yield becomes greater than the US2Y Treasury Yield and has a track record for signalling recession. I've been tracking the reversion for the past two years for any hint of sense of whether the US FED would cut FEDFUNDS rates or if bond traders would drive yields/prices towards reversion. This time, the fed's narrative is driving the reaction here.
To express this idea I've put on long CBOT_MINI:10Y1! and short CBOT_MINI:2YY1! via the futures market. I'll keep rolling the futures contracts until the yield curve starts to form a top, likely a spread value between 1.5-3.0.
M2 supply seasonality - sell in may & go away until OctoberUsing this formula:
(FRED:M2SL+ECONOMICS:EUM2+ECONOMICS:JPM2+ECONOMICS:CNM2+ECONOMICS:INM2+ECONOMICS:GBM2+ECONOMICS:CAM2)/100000000000000
This formula includes US, EU, GB, CAN, JP, In & CN M2 money supply.
You can clearly see M2 money supply seasonality changes, rounding consolidation from June1st & going up starting from October. Every time - for the last 5 years very clearly.
More global liquidity should drive the markets up.
The 3-way of Economic Nightmares.I recently had a discussion on X, with regard to the Forecasting ability of High Yield Spreads. I was making the claim they do possess Leading Indicator qualities, while a gentleman took the other side of this debate.
To illustrate my views, I've put together a chart of FedFunds Rate, Unemployment Rate, and said High Yield Spreads.
This chart shows the last ~28yr of the above mentioned series, and how they "play" with one another.
A) Shows the period leading into the "DotCom" Bubble. We see High Yield Spreads rise first - Leading the other two data series. In a Coincident fashion, FedFunds then rolls over, while Unemployment shoots higher. A successful "Forecast" by High Yield Spreads of the impending Downturn/Recession. A successful Leading Indicator.
B) Shows the period leading into the "GFC". We once again see High Yield Spreads rise, this time SHARPLY, albeit with much less "lead time" than the previous example. As with example A), FedFunds and Unemployment then begin their inverse (to each other) dance. Once again showing High Yields Spread giving us that Advanced/Leading warning that things were getting fragile in the economy. A successful Leading Indicator - with admittedly less warning time.
C) Shows us an outlier in this analysis, and for good reason. We see our 'significant' rise in High Yield Spreads, but what we do NOT see, is FedFunds and Unemployment doing their typical dance. Unemployment continues to head lower, while FedFunds begin to rise - the OPPOSITE of what they did in the prior 2 examples.
D) Shows the period surrounding Covid. Once again High Yield Spreads shoot up in a dramatic fashion, warning bells should be going off in markets. Much like 2 of the previous 3 examples, FedFunds had also been in a "hiking" cycle. And right on cue, Unemployment skyrockets; completing our 3-way from Hell.
We now find ourself in E). In the Oval we see our significant rise in High Yield Spreads, but this is accompanied by rising FedFunds, so we do not have our "danger" signal. Unemployment also remains low. We now however see High Yield Spreads beginning to turn up, with talks of Rate Cuts to FedFunds, as well as Unemployment rising.
History may not repeat, but it does often rhyme. Are we starting to see warning signs flashing? Only time will tell, but as stated in previous posts... It's definitely not a time to be leveraged, or riding on large gains you haven't secured.
TLDR; High Yield Spreads followed by Fallings FedFunds and Rising Unemployment = Market/Economic Stroke.
As always, good luck, have fun, practice solid risk management. And thank you for your time.
PIMCO Warning on Fed's First Cut in 4 Years next week The only event that matters next week is the US Federal Reserve's interest rate decision, which could result in its first rate cut in over four years
PIMCO analysts, in a fresh note, outlined what could be in store for the U.S. dollar as the Fed embarks on its rate-cutting cycle. Historically, the dollar has shown a tendency to weaken, at least briefly, following the Fed’s initial rate cuts since the 1990s.
The Fed now faces a tight decision on whether to opt for a larger-than-expected half-point cut or stick with a quarter-point reduction.
An aggressive half-point move could raise concerns that the central bank is concerned about the economic outlook for the US, potentially prompting markets to price in further, more drastic rate cuts beyond the Fed's current trajectory.
$EUINTR -ECB Cuts Interest Rates for 2nd Time
- The European Central Bank cut the key deposit interest rate by 25bps to 3.5% as expected, after a similar reduction in June, and a pause in July, reflecting an updated inflation outlook and better transmission of policy.
At the same time, the interest rates on the main refinancing operations and the marginal lending facility were lowered to 3.65% and 3.90% respectively.
source: European Central Bank
Inflation, 2yr-bond yield, fund rate, unemployment, recessions The chart illustrates how five key economic indicators—Inflation, 2-Year Bond Yield, Federal Funds Rate, Unemployment Rate, and Recessions—compare across different time periods or economic conditions.
1. Inflation: This line or bar typically shows the rate at which prices for goods and services rise, leading to a decrease in purchasing power. Inflation is crucial for understanding cost-of-living adjustments and purchasing power. The chart might indicate periods of high or low inflation and how it correlates with other indicators.
2. 2-Year Bond Yield: This line represents the interest rate on 2-year government bonds, which reflects investor expectations for short-term economic conditions and interest rates. A higher yield often suggests expectations of rising interest rates or inflation, while a lower yield might indicate expectations of economic stagnation or lower rates.
3. Federal Funds Rate: This rate, set by the Federal Reserve, influences overall economic activity by affecting borrowing costs. Changes in the Federal Funds Rate can signal the Fed’s stance on monetary policy, with increases often aiming to combat inflation and decreases aiming to stimulate growth.
4. Unemployment Rate: This line measures the percentage of the labor force that is jobless and actively seeking employment. It provides insights into labor market conditions and economic health. High unemployment typically indicates economic distress, while low unemployment suggests a robust job market.
5. Recessions: Recessions are usually marked as shaded regions or periods on the chart. They indicate times when economic activity is declining, often accompanied by rising unemployment and decreasing inflation. The chart might show how other indicators like inflation and bond yields behave during recessions.
Comparative Insights:
Correlation: By comparing these indicators, the chart helps identify patterns, such as how rising inflation might correlate with higher bond yields and Federal Funds Rates.
Economic Cycles: It shows how these indicators respond to economic cycles, including periods of expansion and recession. For example, during recessions, inflation might decrease, bond yields might fall, and unemployment might rise.
Policy Impacts: The chart may also highlight the impact of monetary policy changes (reflected in the Federal Funds Rate) on inflation and unemployment.
$USIRYY -U.S Inflation Rate Falls to 2.5%- The annual inflation rate in the US slowed for a 5th consecutive month to 2.5% in August, the lowest since February 2021 and below market expectations of 2.6%.
Compared to the previous month, the CPI rose 0.2%, the same as in July, and matching forecasts.
Meanwhile, annual core inflation steadied at an over 3-year low of 3.2% but the monthly gauge edged up to 0.3%, above forecasts of 0.2%.
source: U.S. Bureau of Labor Statistics
Unemployment & RecessionsWhen #unemployment starts rising like it is doing now, I have not found another time where is suddenly reverse & turns down.
Oh, yeah, #recessions are then very often seen to appear.
This opens up opportunities in sectors that track this misfortune: #gold & #silver #miners.
One Chart to Rule them All ~ 10Y/2Y and 10Y/3M Yield Spreads10Y/2Y and 10Y/3M Yield Spread
One chart to rule them all. I have combined the 10Y/2Y Yield Spread (purple line) and the 10Y/3M Yield Spread (blue line) onto one chart. You can get updated readings on it at anytime on my TradingView page (link in bio above)
I have measured the historic timeframe from un-inversion to recession for both datasets. Un-inversion occurs when the yield spread rises back above the 0 level.
Given the 10Y/2Y Yield Spread has just un-inverted (moved above 0), I thought this a worthy exercise. The findings are interesting and useful.
Main Findings / Trigger Levels
The findings are based on the last 4 recessions (this as far back as the 10Y/3M Yield Spread chart will go);
▫️ Before all four recessions both yield spreads un-inverted (only one has to date);
- At present only the 10Y/2Y yield spread has un-inverted (2nd Sept 2024), thus we can watch for the next warning signal which is an un-inversion of the 10Y/3M yield spread. Without both yield spreads un-inverting the probability of recession is reduced.
▫️ The 10Y/2Y typically un-inverts first and the 10Y/3M un-inverts second.
-Historically the delay between the 10Y/2Y and the 10Y/3M un-inversion is between 3 to 10 weeks (23rd Sept – 11th Nov). This is the date window that we can watch for a 10Y/3M un-inversion (based on historic norms).
-If we move outside this window beyond the 18th Nov with no 10Y/3M un-inversion, then we are outside the historic norms and something different is happening. Nonetheless watching for the un-inversion of the 10Y/3M after this date could be consequential.
▫️ On the chart I have used the last four 10Y/2Y yield spread un-inversion timeframes to recession and created a purple area to forecast these from the recent the inversion on the 2nd Sept 2024 forward (Labelled 1 - 4). This creates a nice visual on the
chart. Based on these historic timeframes and subject to the follow up 10Y/3M un-inversion confirming in coming weeks, the potential recession dates are as follows (also marked on chart);
1.28th Oct 2024 (based on 2000 10Y/2Y un-inversion to recession timeframe)
2.03rd Feb 2025 (based on 2020 10Y/2Y un-inversion to recession timeframe)
3.12th May 2025 (based on 2007 10Y/2Y un-inversion to recession timeframe)
4.25th August 2025 (based on 1990 10Y/2Y un-inversion to recession timeframe)
✅ Remember, you can check in on this chart and press play to get updated data at any time by clicking the link in the comments below or by following me on TradingView👍
▫️ I will include a table in the comments which outlines all of the above metrics with dates. I will also share a chart with a zoomed in version of present day so that all the above trigger dates can be more closely monitored.
Finally, it’s important to recognize that these findings and trigger levels are based on the last four recessions. There is no guarantee that a recession will occur or occur within the set trigger levels. What we have is a probabilistic guide based on historic patterns. This time could play out very differently or not play out at all. Regardless, all of the above findings help us gauge the probability of a recession with historic timeframes to watch. It leaves us better armed to make the necessary risk adjustments, particularly if the 10Y/3M yield curve un-inverts.
Price is king, and at present, prices are pressing higher on most relevant market assets. From the above findings and the current positive market price action, it appears we have a little more time before being hauled into a longer-term correction or recession. I lean towards the later dates (2, 3, and 4 above) for this reason. Interestingly, many of my historic charts from months ago and last year suggested Jan/Feb 2025 (also option 2 above) as a very high-risk period. You can view these charts under the above specific chart on TradingView.
This chart is your one-stop shop for checking recession trigger levels based on historic timeframes for both yield spreads. You can update this chart data anytime on my TradingView page with just one click. Be sure to follow me there to access a range of charts that will help you assess the direction of the economy and the market. Thanks again for coming along!
Remember, you can check in on this chart and press play to get updated data at any time by clicking the link in the comments below or by following me on TradingView.
Thanks
PUKA
$CNIRYY (August/2024)- China's annual inflation rate edged up to 0.6% in August 2024 from 0.5% in July,
falling short of market forecasts of 0.7%.
Still, it was the highest print since February,
marking the 7th straight month of consumer inflation amid supply issues due to flaming heat and pouring rains.
Food prices rose for the first time since June 2023, with their rate of increase the fastest in 19 months (2.8% vs flat reading in July) as fresh vegetables rebounded sharply.
Meanwhile, non-food prices increased 0.2% yoy, much slower than the prior 0.7%, on softer rises in cost of clothing (1.4% vs 1.5%), housing (flat reading vs 0.1%), health (1.3% vs 1.4%), and education (1.3% vs 1.7%).
At the same time, transport costs fell at a steeper rate (-2.7% vs -0.6%), with lower oil prices offsetting higher cost of utilities.
Core consumer prices, deducting food and energy costs, increased 0.3% yoy, the least since March 2021.
Monthly, the CPI rose 0.4%, the second month of gain but lower than consensus of 0.5%.
source: National Bureau of Statistics of China
Downtrend sell short SP500 NASDAQTraders, both the 3-month Treasury Bill rates and the S&P 500 are showing signs of a correlated downtrend, similar to patterns observed in previous market downturns like 2002 and 2008. Treasury rates appear to have peaked and are now starting to drop, which historically signals a shift to a risk-off environment. This usually leads to capital flowing out of equities and into safer assets, often preceding economic slowdowns.At the same time, the S&P 500 has shown weakness, dropping over 2% recently due to poor manufacturing data and growing economic concerns. With the Fed potentially cutting rates soon, there's increasing volatility, particularly in tech stocks, which reinforces the likelihood of a substantial market correction. Prepare for what could be a prolonged downtrend based on these signals.
$USNFP -U.S Non-Farm Payrolls (MoM)$YSNFP (AUGUST/2024)
US Economy Adds Fewer Jobs Than Expected
source: U.S. Bureau of Labor Statistics
- The US economy created 142K jobs in August, more than downwardly revised 89K in July but below market expectations of 160K.
Most job gains occurred in construction and health care while manufacturing employment declined.
Meanwhile, the jobless rate edged lower to 4.2% from 4.3% in July.
Watch out as U.S full time employment peaked in 2023 June.While the U.S. nonfarm payroll growth is still averaging 0.12% , just slightly below the average long term 0.14% growth in the past 12 months, the full time employment picture is somewhat grimmer.
The U.S. full time employment peaked in 2023 June, and since there is approximately 1.7 million less full time employee. Probably not a sign for a healthy labour market.
Gold and Silver Miners go where unemployment goes.When #gold and #silver #miners enter bull eras, massive hardship ensues for the people.
Makes me kinda sad to think about it this way...
#unemployment #economy #recession
FED Funds Rate 9-10%FED Funds Rate In the long-term, the United States Fed Funds Rate is projected to trend around 9-10%
Mortgage Delinquencies About to Skyrocket"Financial Advisors" tend to be clueless about the overall health of the market and the economy.
The "advisor" profession is laced with toxic narratives about "your goals" and "focusing on the long term" and "staying invested". They're clueless as to what is going on.
As the recession sets in and the market collapses, we will see mortgage delinquencies soar.
Remain patient, refrain from buying ANYTHING with a debt component (ie homes / cars). We will soon see a credit freeze, as banks and lenders dump their assets and borrowers fail to meet their loan covenants.
This is the real deal, folks.
Stay low and move fast!
10y/2y Treasury Yield Curve cant make up its mind10y/2y Treasury Yield Curve
⏳ Just cant make up its mind......
I wonder what Friday's stamp will be
US10Y2Y Spread vs SPX500History is repeating itself.
When US Treasury 10Y minus 2Y yield turns positive and inching higher, investors should be precautious.
ISM Manufacturing & ISM Services PMI Combined show trigger levelISM Manufacturing and ISM Services PMI Combined 🪢
This week the ISM PMI's were released as follows:
🚨ISM Manufacturing PMI = 47.2 (contractionary)
✅ISM Services PMI = 51.5 (expansionary)
With both metrics offering mixed signals, I decided to make a chart that combines the ISM Manufacturing and ISM Services PMI into one dataset on the chart.
Interestingly it provided a clean chart with many patterns to observe, and useful forward looking trigger levels to keep an eye on. Don't forget you can update on this chart data anytime on my TradingView page with one click.
At present you can see that the data is compressed into a something resembling a "Darvas Box". I understand this not price but data, however this economic data is clearly in a compressed channel and appears uncertain in terms of a definitive direction. It has also never been in a pattern like this for this long in the past, which could mean a break out up or down is closer than it is further away.
Prior patterns have demonstrated that break throughs of both diagonal and horizontal support lines has resulted in significant downward movements. This is evident on the chart and this is something we can watch out for should we break below the box.
Consistent with past recession's the Combined PMI dropped below the 50 level (🔴red circles) way back in Dec 2022. Since then we have oscillated around the 50 level in the compressed box in indecisive fashion.
Never has the data behaved specifically this way in the past, specifically for this long. There are no other compressed boxes of data lasting this long. At some stage the ISM Data will push the its way out of this box I have drawn and it could be a good indicator to observe for early signals of the direction of the economy in the U.S. as a whole (both services and manufacturing combined)
As always, this chart in on my TradingView page, and you can click on it at any stage to get an updated reading on the chart so you can quickly get a visual update on the direction of the U.S. Economy via combined ISM PMI's.
Enjoy
PUKA
RECESSION ALERT | Total Vehicle Sales Data Print DelayedWith last months revision of 818,000 jobs, it is probably safe to conclude that other data points have also been incorrectly reported (manipulated for political purposes).
Total Vehicle Sales for the month of August 2024 were supposed to be published today. As of 8:45 PM EST, the data STILL has not been released.. HUH??
Total vehicle sales are a leading economic indicator. I’m guessing the numbers are bad.. really bad.
In Germany, the economic powerhouse of Europe, vehicle sales collapsed in August (in August 2024).
The absence of today's scheduled print is a choice. Someone decided that Total Vehicle Sales (for the month of August 2024) would not be released as scheduled.
In addition to illustrating the obvious failures of the current US political administration, this is also a strong indicator that Tesla ( the entire green new scam ) is on the verge of bankruptcy. I will explain this in more detail later.
