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As Deflation Hits the Economy The Price of TIPs Should FallEarlier in 2022 I got some Bullish Exposure to Deflation by positioning Bearishly against TIPs (Treasury Inflation-Protected Securities) as can be seen here: Fast-forward to today and we can now see the CPI declining and the TIPs declining even faster, This ETF Tracks the price of these TIPs and we can see that it is breaking through support even though the CPI has only retraced half way. If the CPI continues on this path and the Bond Market continues to price in Long Term Deflation, we should then see the pricing of this TIPs based ETF come down crashing in a big way. If that does happen, I would target at least the 1.618 Fibonacci Extension.
AMEX:SCHPShort
by RizeSenpai
1
US 10-year real rates (TIPS) – the rising true cost of capital US 10YR ‘real’ rates are essentially US 10yr Treasuries adjusted for 10yr inflation expectations – TradingView users can set this up using the equation: TVC:US10Y-FRED:T10YIE. We can see this as the true cost of capital and in effect, the higher yields rise the more this supports the USD and negatively impacts US equity valuations. The rate of change (ROC) is always important, but if US 10yr real rates head to 2% then this may accelerate the selling in the US500 and NAS100.
TVC:US10YLong
by Pepperstone
Is the 2y bond telling us something? HAS THE CRASH BEGUN?Bonds yields have been moving up at a fast pace recently - the 2 year bond yield moved between may and now nearly a full percentage point. Currently at the levels seen around 2008 right before the markets crashed. With real rates on the 3 Month bill actually reaching the exact rate before 08 crisis. One thing I noticed is that the longer end of the curve, i.e bonds with longer maturity have risen at a faster pace as well in the recent weeks. Hedge funds put massive bets in the last few weeks that yields would go higher ( shorting bonds) and I wonder if higher bonds pushing for higher rates is what may be the trigger that puts us into a recession and I do think into a real crash in the stock market. What do I mean? I think that the market has realized that inflation has been going down in many areas as shown month after month on the CPI, PCE and such reports. Although, there are still many areas where inflation exists and does not seem to be going anywhere, such as real estate, energy, and even food. Another big factor here is loan payments, mortgage payments, that people are paying on cars, houses, etc. So people are not saving, people are taking more and more credit as shown recently that we are currently at record levels of credit card debt and the lowest rate of savings in over a decade. The optimism in the market since the start of the year, was so that the market started to be ok with the fact that rates would be going to around 5%-5.5%, and even pricing in rate cuts during 2024- as we all know, the markets are forward looking, so equity prices started moving higher. But after all this, we have reached a point where the market is questioning valuations when we have a good return in "risk free" assets, and with so much concentration in a handful of names bringing great companies at trillions of dollars of market cap but with no where near a reasonable price relative for the risks. Not to mention the soft earnings, yes we beat expectations, but is it really hard to beat such low expectations? if you look at earnings in compared to a year ago you will see that there is hardly any growth and even no growth and lower sales. Back to Bonds- why would yields go up? Fitch downgrading the US credit market is one reason, but not at all the whole story. Sticky inflation could another reason. One major one which I think has been forgotten recently, is the banks. Reginal banks and even more larger banks have on their balance sheets loads of us treasuries, when SVB and First republic collapsed, it showed how fragile the banks are to rising yield rates on the securities they hold. Now that is is happening again, and this time along with longer maturity securities, I think there may be a real crisis waiting to unravel. Perhaps bringing dozens of banks to the brink of collapse. This is something that would be to great for JP Morgan or any other major bank to buyout and save by themselves. On another note The market is showing its concern, for fiscal issues, real problems with the US paying over a trillion Dollars a year just on interest payments. Less income on taxes and much more spending due to inflation. I think the current environment is screaming a lack of trust and wants real returns for the risks in takin on more US debt, so rates are going up. How much higher can yields go without something breaking? I think the 30y mortgage rate at 7%+ currently is going to be another breaking point. Without going to further in the housing market, I will just note that with rent prices at all time highs in many cities, could be a signal that home owners are trying to get a yield on their investment that can cover their mortgage expenses which are rising. Putting the expense on the renter. When it reaches a level where renters cannot pay these amounts that's when owners cannot keep their homes, selling starts. Home owners seeing rates rising ( 10Y bond is the best indicator as most Mortgage brokers use that to calculate rates ahead) can start to panic and sell. So I do think that if there will be a total crash it will happen simultaneously in many markets and will obviously cause major panic and mayhem. This time the Fed wont be able to do much, printing money will be seen as a major fiscal risk and may cause the end of the dollar all together, inevitably a major correction will be needed to reset financial valuations and restore confidence in the debt markets. To summarize, there are definitely cracks, and real risks that seem to outweigh the current reward in the equity markets..
TVC:US02YShort
by LEO_IAMNOTUNCERTAIN_55555
1
HYXU: Resistance Break & RestestTechnical Analysis: HYXU (iShares International High Yield Bond ETF) has been slowly grinding upward since it's October '22 lows. After almost 17 months beneath the Bull Market Support Band (20w SMA, 21w EMA), it crossed over the the upside in November of last year and has shown significant gains in the last 10 months. The assets last big push came at the significant resistance level at $47.50, which it finally flipped after 3 failed attempts. Having just completed a successful retest of the level as support, I anticipate a clean move up to $49, then $51.25, based on prior S/R levels. Fundamental Analysis: As we've all had our eyes on the Fed for the last year and a half, I'm sure most of you know that interest rates are at their highest levels in roughly 22 years. By doing this, the Fed has pulled a large portion of liquidity out of the bond market with enticing, low-risk Treasury yields. However, as we approach their terminal rate of ~550 BPs, and as the high cost of money starts to impede businesses' ability to invest and grow, I anticipate a rotation out of stocks and into fixed income investments. The most readily accessible of which, for retail investors, are corporate bond ETFs such as HYXU. With a yield of ~6.5%, it remains more than competitive with even the highest paying treasury, and offers investors a liquid alternative to locking up their funds for months or years. Feel free to post your questions, comments, concerns, qualms, quandaries, contributions, or conversation below! **Disclaimer** This commentary is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this article should consult with his or her advisor.
CBOE:HYXULong
by NotSoDegen
Yields Prepped to Spike Higher after a Confirmed TLT BreakdownThe TLT has broken down an Ascending Broadening Wedge and given us one Bearish Confirmation back test; now we are looking for a second lower high within the range of the breakdown to truly get convicted on the move. However, for the time being, I do think this chart should be watched, as I have a suspicion that a lot of the shorter- and midterm bond yields are going to spike higher along with the US Dollar for reasons I already explained in this post here:
NASDAQ:TLTShort
by RizeSenpai
2
DXY Is Long-Term Still BearishOne of the main reasons why USdollar – DXY may stay weak is DXY/ZN (DXY against 10Y US Notes) ratio chart. Now that 10Y US Notes is looking for a bigger recovery, DXY could easily see more weakness, as DXY/ZN ratio chart is still looking lower, but ideally once current bearish running triangle in (B) fully unfolds, which can be in final stages. With bullish stocks and while bonds are trading at potential support, there's no real reason to be bullish on USDollar, so DXY is long-term still bearish. DXY/ZN ratio chart is now at the upper triangle line for potential final subwave E of a bearish triangle in (B). Bond market recovery, may slow down the USdollar again, which can push DXY/ZN ratio chart into wave (C), but confirmation is below lower triangle line. However, of course, if USDollar will keep recovering, then DXY/ZN may face higher resistance for a flat correction within wave (B), but it’s still bearish on a higher degree time frame, so sooner or later DXY will back to bearish mode.
TVC:DXYShort
by ew-forecast
The Overnight Reverse Repo Facility Looks to be Bottoming OutMoney that has been parked at the Fed's Reverse Repo Facility due to the attractively high interest rates the Fed has set for money parked there has been on a steady decline since late 2022, and recently, this year we confirmed a breakdown of a Bearish Dragon, which led to a BAMM move down to complete a Harmonic M-shape. This then represented an influx of liquidity exiting the facility and effectively hitting circulation, which led to that money chasing assets and commodities. This chasing of assets and commdoities effecctively backed the 2023 Stock Market Rally. The target I had set for this move was down to the 0.886 of a Bullish Bat and now months later we can see that we came very close to it, but it would seem that rather than getting a full 0.886 retrace we are instead getting a confirmation-styled RSI reaction as price Bounces from the 1.618 Extension, which just so happens to align with an AB=CD formation it's made on the way down. I see this as an indication that the liquidity will soon stop flowing out from the facility and that liquidity will now begin to flow back to the facility, effectively taking money out of circulation, which would likely result in a decline in asset prices and a decline in the trading of Short Term Debt on the open market, which could then lead to Short Term Yields rising overall along with the US Dollar as institutions once again begin to lock up their dollars in this facility and chase yield rather than assets. Recently, I have been seeing a lot of weakness in the banking sector. That weakness may act as a catalyst for these institutions to once again park their money with the Fed, just as it did before. As always, my target for an ABCD is back to the Level of C, so we should see this rising back up about 30% before we can start looking for signs of this topping out again.
FRED:RRPONTSYDLong
by RizeSenpai
2
$DXY -Middle Range Warzone (105vs100)- TVC:DXY seems to be wanting a break-out from Resistance Trendline coming from 114 Highs, despite failing to do so. A Resistance Trendline that has pushed the price lower each time price has approached it. Wether that break-out and resumption is bound to happen or not in the short term, it is yet to be seen. Currently, TVC:DXY is in the midst of a Middle Range War-Zone, struggling for direction. For now, Price-Action suggest a Lower High being printed at 104.5 , a Lower High from 114 Downtrend. By Breaking Structure(BoS) of the most recent Lower High (LH) 104.5 would validate the Trendline break-out and suggest furthermore uptrend continuation for TVC:DXY , headed for the the Range's Ceiling at 105.8 and testing the broken macro structure Support Trendline Move towards 105.8 range's ceiling would be quite bearish for overall Financial Market's condition. While a move to the range's bottom at 100 level would be quite promising for other Market Sectors to continue performing well. Very interesting week ahead for The Markets, especially TVC:DXY , which dictates Financial Markets Swings *** TRADE SAFE NOTE that this is not Financial Advice . Please do your own Research before partaking on any Trading Activities based solely on this Idea.
TVC:DXY
by Mr_J__fx
Inflation vs Innovation Can the Markets Handle the HeatGlobal markets face contradictory forces in 2023. Inflation still simmers as central banks tighten money supply worldwide. Geopolitical friction continues while economic growth likely slows ahead. Yet technological transformation charges ahead, with artificial intelligence poised for explosive improvements. Investors and policymakers must stay nimble in this uncertain environment. After plunging painfully in 2022, stocks have rebounded with vigor so far this year. This despite raging inflation and the Federal Reserve's hawkish stance on interest rates. Hefty liquidity efforts in China likely buoyed prices. Investors may also have grown too pessimistic amid still-sturdy corporate profits. But sentiment could sour again if supply chain snarls resurface. In bond markets, yields continue reflecting dreary growth expectations after last year's surge. The inverted yield curve especially screams pessimism on the near-term economy. Meanwhile, the Fed's bond portfolio shrinkage has yet to rattle markets. This implies the Fed's quantitative easing and tightening have limited impact on actual money supply, defying popular perception. On inflation, early 2023 figures show it easing from 40-year heights but still well above the Fed's 2% bullseye. The Fed remains leery of declaring victory prematurely. Taming inflation sans triggering severe recession is an epic challenge. Geopolitical wild cards like the Russia-Ukraine war that evade the Fed's grasp will shape the outcome. Amidst these crosscurrents, technological forces advance relentlessly. The frantic digitization around COVID-19 now gives way to even more seismic innovations. The meteoric success of AI like ChatGPT provides a mere glimpse of the transformations coming for healthcare, transportation, customer service and virtually every industry. The promise appears gargantuan, with AI generating solutions and ideas no human could alone conceive. But the warp-speed pace also carries perils if ethics and safeguards fail to keep up. Mass job destruction and wealth hoarding by Big Tech could ensue absent mitigating policies. But wisely harnessed AI also holds potential to uplift living standards globally. For investors, AI has already jet-propelled leaders like Google, Microsoft, Nvidia and Amazon powering this tech revolution. But smaller firms wielding these tools may also see jackpot gains, as costs plunge and new opportunities emerge across sectors. That's why non-US and smaller stocks may provide superior opportunities versus overvalued big US tech. In conclusion, the global economic and financial landscape simmers with familiar threats and novel technological promise. Inflation may moderate but seems unlikely to vanish given lingering supply dysfunction and distortions from massive stimulus. Stocks navigate shifting sentiment amid rising rates and demand doubts. And machine learning progresses rapidly into a future we can now scarcely envision. Nimbly navigating such turbulence requires flexibility, tech savviness and philosophical courage. Responsibly steering AI's development is a herculean challenge, to maximize benefits and minimize pitfalls. Individuals need to stay skilled while advocating protections against job disruption. Policymakers face wrenching tradeoffs between growth, inflation and financial stability - all compounded by geopolitics. Yet within uncertainty lies opportunity for those poised to seize it. The future remains ours to shape, if we summon the wisdom and will to guide technology toward enriching human life rather than eroding it. The road ahead will be arduous but need not be hopeless, if compassion and conscience inform our creations.
NASDAQ:NDXEducation
by BitcoinMacro
US10Y A break below the 1D MA50 will trigger a 2nd sell-off.The U.S. Government Bonds 10YR Yield (US10Y) is approaching the 1D MA50 (blue trend-line) that has been supporting the price action since May 16. The long-term trend since the October 21 2022 market top has been bearish, guided downwards by a Lower Lows trend-line but since February it has transitioned into a Rectangle. The recent July 07 High was a direct hit at the top of the Rectangle, so this week's rejection comes as a very natural consequence. If the price closes a 1D candle below the 1D MA50, the 2nd part of the Rectangle's bearish leg will most likely be triggered. As you see during this long-term pattern, we've had two -19.70% decline sequences and if the current one turns out to be of that magnitude, we are looking at a 3.300% target. Note that 4 days ago we formed a 1D Golden Cross, technically a bullish pattern, but the previous 1D Death Cross (bearish pattern) turned out to be the Rectangle's bottom. On that notion, the Golden Cross may have formed the top. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
TVC:US10YShort
by TradingShot
3
US10Y: Excellent long term sell opportunity.The US10Y turned neutral on the 1D timeframe today (RSI = 51.795, MACD = 0.074, ADX = 33.857) after it got rejected on R1 two days ago. It is likely to see a sharp fall as on the March 2nd rejection, and in that case S1 and S2 won't pose any bullish pressure to the downtrend, nor should the 1D MA50 and 1D MA200, which in the past 12 months haven't had any such significance. Consequently, we consider the current level early enough for a low risk sell position on the long term, targeting the S3 (TP = 3.300%). As you see, the trading structure follows quite similar legs since November and right now we are most likely on a leg 2. ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
TVC:US10YShort
by InvestingScope
9
Waiting on Inflation and Earnings Numbers - Day 2S&P 500 INDEX MODEL TRADING PLANS for TUE. 07/11 Markets are waiting to see and digest the inflation numbers and then the kick-off of earnings season. If early earnings show any unexpected weakness ("unexpected" is the key word there), then we might have seen an interim top; but, if the earnings appear to be on track or with a bias to the upside surprises then the next bull leg could get well entrenched. Until this clarity emerges, expect volatility and choppy markets ahead. The previously stated level of 4400-4410 continues to be in play as critical support. Positional Trading Models: Our positional models indicate staying out of the markets until otherwise stated. By definition, positional trading models may carry the positions overnight and over multiple days, and hence assume trading an index-tracking instrument that trades beyond the regular session, with the trailing stops - if any - being active in the overnight session. Aggressive/Intraday Models: Our aggressive, intraday models indicate the trading plans below for today. Aggressive, Intraday Trading Plans: For today, our aggressive intraday models indicate going long on a break above 4441, 4423, 4417, 4400, or 4375 with a 9-point trailing stop, and going short on a break below 4438, 4415, 4390, or 4372 with a 9-point trailing stop.  Models indicate explicit long exits on a break below 4420 or 4397, and short exits on a break above 4392. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals from 10:16am EST or later.
CBOE:SPX
by TradersAIDotCom
A traders’ playbook: looking to Japan for volatility With the US nonfarm payrolls behind us, we look to the US CPI report as the next big risk for markets. Ahead of this, we’ve seen USD sellers start to dominate with EURUSD eyeing a re-test of the 22 June high of 1.1012 and USDJPY 300 pips off its recent high. We also see GBPUSD looking poised to test the 1.2850 highs, so one for the breakout traders, especially with UK jobs/wages in play this week. Gyrations in the US (and DM) bond markets have started to impact equity sentiment, especially US 5-year real rates (DFII5 on TradingView) rising to the highest levels since 2008, at a time when the G4 central bank balance sheet is falling. We continue to watch this dynamic, while micro factors may start to play a role, with Q2 earnings rolling in. Commentaries from CEOs on expected demand, input prices and how the cost of capital is impacting are a few themes to focus on. The US500 rests on 4400 with the shorts eyeing a test of the 26 June low of 4329 – a break here, especially if it coincides with the VIX index rising above 18%, should get traders in front of the screens and taking down the timeframes. We also saw the return on the JPY, with shorts squaring as the carry trade was partly unwound - higher G3 bond and rates volatility a clear consideration here, with the MOVE index pushing to 130. We also saw Japan's data flow come in hot, notably in the TANKAN report which showed Japanese corporates expect inflation (in 5 years) to exceed 2% for the fourth quarter in a row. We see Japan's 10yr swaps rising to 60bp, and 10yr JGBs to 42.8bp and the fact funds are shorting Japanese bonds could be telling ahead of the BoJ meeting on 28 July. Japan takes centre focus – if the market genuinely believed the BoJ were to tweak its uber dovish monetary policy setting it could cause real gyrations through markets. We watch China data ahead of the July Politburo meeting, although, with elevated expectations of stimulus to be announced during this key event, one could easily feel that bad data could easily be forgiven. Central bank meetings in NZ and Canada may get some attention – although it’s the BoC meeting, which looks the far livelier affair. Rearview alpha plays - what worked best: • G10 and EM FX play of last week: short CADJPY (-1.5% last week), short USDHUF (-2.6% on the week) • Equity indices play of last week: Short FRA40 (-3.9%), short EU Stoxx 50 (-3.7%) • Commodity plays of last week – Long SpotCrude (+4.6%), short XAUGBP (-0.8% on the week) – lower for four consecutive weeks. • Equity plays for the radar – CSL (AU) – shares have fallen in 9 of 10 trading sessions. RIVN (Rivian Auto US) – shares have gained in 8 consecutive trading sessions. JP Morgan – commence the US Q2 corp. earnings on Friday. Marquee events for traders to navigate: US Core CPI inflation (Wed 22:30 AEST) – the marquee event risk of the week. The consensus is weighted towards core CPI at 0.3% MoM / 5% YoY (from 5.3%), with the economist’s range of estimates seen between 5.1% to 4.8%. Headline CPI is expected to come in at 0.3% MoM / 3.1% YoY (from 4%). The Cleveland Fed Nowcast model sees core CPI running at 5.1% YoY. With risky assets sensitive to moves in US bond yields, a core CPI print at/above 5.3% is the ‘pain trade’ and would likely see US bond yields rise further and risk taken down. While it may lower the prospect of a hike from the Fed in the July FOMC meeting, it would take a truly weak number to see market pricing for a 25bp hike fall below 50%. UK jobs and wages report (Tues 16:00 AEST) – traders will recall the red-hot April wage data which contributed to the BoE hiking rates by 50bp (in the June BoE meeting), so GBP and UK100 traders will be watching this data point closely. The market expects weekly earnings (ex-bonus) 3M/YoY to come in at 7.1% (from 7.2%). Rates markets have priced a 76% chance of a 50bp hike at the 3 Aug BoE meeting, with peak bank rate expectations at 6.41%. We also see that GBPUSD has rallied in the last 10 consecutive wage reports. US 2Q corporate earnings – JPM, J&J, Citi and Wells Fargo get us going with earnings on Friday (14 July), with JPM’s numbers getting the full attention of traders – the implied move on the day of earnings for JPM (derived from options) is 1.3%, with the bulls looking for a firm break of the range highs of $147. While we watch the price action in the US big US money centres, keep an eye on the small end of town and the regional banks – the KRE ETF is a good proxy here. Bank of Canada meeting (Thurs 00:00 AEST) – this is a ‘live’ meeting that could result in some sharp movement in the CAD – after the recent Canadian jobs report, retail sales and core CPI report, the market is skewed to a 25bp hike to take rates to 5%, with the market pricing a hike at 68% chance. We also see 16 of 24 economists calling for the hike. CAD longs preferred, with USDCAD targeting 1.3200. RBA gov Lowe speaks (13:10 AEST) – there is little Aussie tier 1 data to trouble traders this week, so RBA gov Lowe and China data get the attention. Rates markets price a 62% chance of a 25bp hike at the 1 August RBA meeting, so Gov Lowe’s outlook may influence that pricing. The Aussie jobs report (20 July) and Q2 CPI (26 July) remain the big event risks for AUD traders that could decide a hike on 1 Aug. China June CPI/PPI (Mon 11:30 AEST) – the market sees CPI at +0.2% and PPI inflation at -5% (from -4.6%). USDCNH looks to consolidate between 7.2800 and 7.2185, where a break could influence G10 FX pairs, with a higher USDCNH likely acting as a headwind for AUD and NZD. China June trade data (Thurs no set time) – China’s trade data is hard to consider for one’s risk management as there is no set time and typically has a low initial impact on Chinese equity markets or the yuan. As we look for more stimulus to be announced at the July Politburo it feels as though the market will limit the reaction. The current consensus is for China’s June exports to fall -10%, while imports are called down -4.4%. We also get China new yuan loans/aggregate financing through the week (no set time or date), and while closely watched it is unlikely a market mover. US PPI inflation (Thurs 22:30 AEST) – the market looks for 0.4% YoY on headline PPI and 2.6% YoY on core PPI – it’s hard to see this being a big market mover unless we get an outlier print (vs consensus). The PPI print should shape our understanding of the important core PCE deflator (released 28 July). RBNZ meeting (Wed 12:00 AEST) – the market sees this as a low-risk event with all 15 economists (surveyed by Bloomberg) seeing NZ interest rates on hold, with the NZD swaps market pricing just 3bps. AUDNZD gets attention and looks to have put in a short-term bottom, with longs preferred for a move to the 200-day MA at 1.0850. University of Michigan sentiment – the market expects the sentiment survey to increase to 65.5 (from 64.4). We also look at the respondents’ views on US 1-year inflation expectations, with the consensus eyeing 3.1% (from 3.3%), while the 5-10yr inflation expectations are eyed to be unchanged at 3%. Fed speakers – Daly, Mester, Bostic, Barkin, Kashkari, Waller BoE speakers – Bailey (Tues 01:00 AEST and Wed 18:00 AEST) RBA speakers – Gov Lowe speaks (Wed 13:10 AEST) ECB speakers – Villeroy, de Cos, Vujcic, Lane
by Pepperstone
UNRATE Update | December 2021 - PresentThe US unemployment rate can double from here and still be within the long-term range and still below the extremes that have occurred during more recent recessions. Also worth point out that the only time we have been below this level of unemployment (higher employment) was during the Korean war in the early 1950s. Sure, we could see the rate of employment increase - that can happen. But it's unlikely, based on 75 years of data that spans everything from Post-Keynesianism, to Real Business Cycle (RBC), to Monetarism, to MMT. As such, it is safe to conclude that a lower UE rate, from "here", is unlikely. So unemployment has probably bottomed, stocks are yet to recover their December 2021 highs (19 months) and the interest rate on the US10Y is up roughly 200% (having gone as high as + 215%) over the same 19-month period and currently offering a yield of 4.049%; the US10Y maintains it's lag of the US02Y, which is currently offering a yield of 4.95%. In other words, bank lending is more constrained... Wow, even the banks are telling us there is significant risk in the market. Meanwhile a lot of folks are running around telling you how great fake-money crypto supposedly is. Maybe the banks are right about risk.... Oh! one more thing: the VIX has also reached a bottom of sorts.
FRED:UNRATEShort
by ChiefMacro
22% bond yields was the bottom for stocksin 2008, high yield b rated bonds went as high 22% in the peak of panic. This also coincided with the peak of panic for stocks. Quality high growth potential stocks sold for fantastic prices and valuations. And it makes sense to not make sense this way. Bonds are debt, and must get paid first as part of normal business operation. Equity gets the excess profits later as potential dividends or stock buybacks. Debt and equity and the 2 main funding sources for business. Stock investors cannot ignore interest rates and the funding markets. SP:SPX NASDAQ:BND NASDAQ:TLT NASDAQ:IEF NASDAQ:QQQ AMEX:DIA AMEX:VTI
NASDAQ:MBB
by optionfarmers
8
It might be the right time to buy 10 year TreasuriesI see a big opportunity on treasuries with the rates that the treasauries are trading at. Why? Inflation has been going down consistently from 9.1% to 4% and the PPI (which is the Producer Price Index) from 11.1% to 1.1%. These indicators usually draw near the core CPI which has been sticky above 5% and has been the aim for the FED. Rents and some services have been raised this year and are not going down or stabilizing 12 year compared until next year. There is a lag effect in the economy regarding the rate hikes of about 12 to 18 months and we are still to see many of the effects noting that they have been restrictive for just 9 months. Another nice data is the base, 12 month old prices. May and June are the top of the prices from last year due to the supply chain issues and the Russia Ucranie war. Oil went up to 130 dollar a barrel and most of commodities topped last year. So the CPI next week should be a 14 year high real yield high when a 3.2 to 3.5% print on the CPI should show more inflation loosening. Economy is stil in a tight spot, with a strong labor market which made the last rate decisión of the FED a prediction of two more rate hikes this year. Eventhough since then 2 voting members have seen the posible mistake of keep hiking and have said that they should still see the effects of the 500 rate increase and not hike more for at least this year. This alone should drive a big buy througout the curve. Economy is not that strong to see a 14 year high in real yield for a 10 year high with much analysts, including the FED are expecting at least a mild recesión. So rates are very high taking into account the análisis made. A 3.50% on the 10 year and a 4.30% on the 2 year are the aims. But the market has been frightened and selling due to the losses they took from anticipating this move too early. The recent debt limit helped a lot recently for those losses, but its an issue that has been dealt with. A frightened market ussually is an opportunity and I think this is one of them. We still need to see the other 7 memebers of the FED agree, but in an educated guess the next week CPI data must do the job.
TVC:US02YLong
by acrispino
1
Key Drivers of the Market - A Deep DiveHello everyone! Today we will talk about five different important concepts. Many things are happening in markets, so I will create similar reports to help people understand why things are how they are. This will be my first report, so it might be a bit harder to go through, especially because on Tradingview, I can't easily share economic data or random non-Tradingview charts, so I will try to make each concept as simple as possible. Positioning 1) Positioning in markets appears to be quite extreme. Looking at the CoT long/short data for hedge fund positioning, we can get a pretty good sense of whether speculators are long or short. Overall, the market remains short on stocks and bonds. Regarding bond data, it is possible that the positioning is like this for other reasons, which doesn't mean they are bullish. As contrarians, we usually want to go against most speculators, but sometimes the speculators take one position for reasons other than making a directional bet (maybe they are hedged). Another significant market to look at is the energy market, and more specifically, oil, which in my opinion, is very close to transitioning back into a bull market. I am expecting one more shakeout here, with a dip toward 55-60$. I think one more shakeout for oil to take out all the lows (hunt stop loss), and speculators will fully turn short. Speculators have been cutting their longs for a year and are almost about to turn short for the first time in many years. Inflation 2) Expected inflation in the next CPI print is around 3% YoY and 0.3% MoM, potentially influenced by recent commodity spikes. These short-lived spikes could affect June's print, as some food-related commodities had a little rally. I believe inflation could come back with a vengeance, as there are too many potential issues with producing several materials and products. These issues could be exacerbated due to deglobalization and climate change (not the climate getting hotter, but colder). Truflation shows 2.3% YoY inflation, inflation expectations are at 2.3%, and interest rates are between 3.7% and 5.25% across the yield curve. My main view is that inflation will trend lower for a little longer, and its downtrend could end with a deflationary spike, as current real rates are substantially positive. It's even possible that we will get negative CPI MoM prints in Q3-Q4, but inflationary pressures will probably resume once we are done with that. Many argue that core inflation is sticky and too high, and I believe it might stay elevated for a while, but eventually, I think it will start falling. My view on inflation mainly has to do with outright shortages and not with money printing. The current disinflationary trend seen across most countries will probably continue for a little longer as we haven't seen substantial money printing for a while, while interest rate hikes are starting to affect consumers negatively. The biggest issue I see is that commodity producers are struggling and face severe problems due to green policies, deglobalization, and climate change. Another important point is that OPEC+ is about to cut 1-2m barrels/day of production, which means oil could spike as demand remains relatively strong. One of the reasons I think the biggest inflationary threat comes from the supply side (goods/services) is that Japan has had lower inflation than the US, despite keeping rates at 0. China didn't raise rates either and has been pumping liquidity into the system, as well as cutting rates, and yet inflation there is almost 0%. It shows that inflation has come down independently, with markets slowly shorting through various imbalances, not because interest rates increased. At this stage, higher rates might actually have the opposite effect than the one intended. Why? Because of the massive debts at the government level, which are being inflated even further as governments borrow at higher rates. Housing 3) The housing market remains strong, and a deficit exists. More supply will be coming online over time, but there are no signs of weakness or that the supply won't be able to be absorbed by the market. Many people are still waiting for rates and prices to drop in order to buy a house, while those with a mortgage are not selling their houses because they don't want to get a more expensive loan. Therefore we essentially have a balance in the market, with new houses and defaults being absorbed by those with cash and those willing to get an expensive mortgage. Rents have not gone up YoY but seem to be about to trend higher again. As there is still a lot of cash in the market and the US government keeps spending, it's reasonable to expect rents to stay flat or slowly tick higher, even if interest rate hikes are starting to affect the economy. Some countries are really suffering from higher interest rates, as most people have variable-rate mortgages; however, the US is in a better situation as most had their mortgages fixed at low rates. So far, it looks like banks and central banks are taking a loss on all the mortgages issued or refinanced during 2020 and 2021, and this effect won't be reverted any time soon. GDP 4) Q1 GDP growth was revised higher at 2% (from 1.4%), showing resilience in the US economy amidst recession fears. Despite growth in the US markets, concerns over a recession remain. As the US government keeps spending at a high pace, a recession will probably be delayed; without that meaning, it will never arrive. Interest rates have been rising, and the Fed wants to hike rates once or twice again. The Fed will likely intervene to support the economy in 1-2 years. As the deficit grows and rates increase, within the next few years, the government will have absorbed all excess liquidity trapped in the RRP or banks. That means that the Fed will then be forced to start buying bonds. The Fed is currently losing over 50B annually because it has to pay high rates to those that deposit at the Fed, which is effectively direct money printing. With so much government debt, the Fed can't raise rates much higher without adding this inflationary component. Although unemployment and bankruptcies are trending higher, the market is showing resilience. As stated above, the US economy is the most resilient, while many other countries are suffering heavily. What has been very helpful is that so far, we had strong oil production despite the war in Ukraine, while the US was releasing a lot of barrels from SPR. This strengthened consumption and boosted the economy. One important data point that proves that the US hasn't been in a recession is that the Travel Numbers of people flying in the US are at ATHs. How could someone call for a recession with these numbers? It's possible that interest rate hikes and all the printing in the US, along with a strong dollar, helped the US consumer to stay in relatively good shape. How bad do bankruptcies and unemployment get, and when? I don't know. I believe that the yield curve will eventually be right, and we will get a recession, but it's hard to call for one. Although lots of data points to the US being in a recession or close to getting into one, we haven't had proper confirmation for a downturn. Maybe we have been in a mild recession, and that's why the market is rallying so much, as people feared something awful, and this hasn't played out. Stocks 5) Stocks seem to remain in a bull market. After hitting the targets that I mentioned in some of my previous ideas, they had a mini-correction. I never turned fully bearish, but I thought at once, the SPX got at 4450 and the NDX at 15200, the market might have topped. This hasn't played out, and I must admit that the market looks bullish here. I can't say anything with certainty yet, but I'd avoid shorting or being all out. There are still many signals that point to higher stock prices. Apple just had a massive breakout and looks strong. Now at a 3T valuation, which seems too much, but when someone thinks that Apple is one of those companies that are essentially powering a 500T financial system, along with its growth potential with AI, then 3T doesn't seem that much. Although stocks seem expensive relative to the current GDP, let's not forget that AI will boost global GDP massively over the next few years. That means that tech companies like Microsoft and Google will keep expanding. Also, let's not forget that unprofitable tech deflated last year and hasn't recovered yet, so a lot of garbage got washed out and isn't a drag on the market. Finally, many people are missing something important: leverage didn't fuel this rally. The market deleveraged massively in 2022 and is now free from excess leverage. If this rally was driven by leverage, it would be fragile, and a reversal could occur at any moment. Summary To sum things up and add a few final touches... The main things leading the market are: NDX is a monopoly, AI, stock buybacks, passive investing, and government spending. It's improbable that these factors will cease to exist, and things will turn ugly immediately after the best first half the Nasdaq 100 has ever had. Sentiment might be changing and leaning toward bullish, but I am not seeing anything that's seriously worth paying attention to. Sure, maybe we get another little correction, but nothing more than that. The market looks very strong. Some leading indicators even show that liquidity and financial conditions will improve from here. I believe that too many people are stuck looking at interest rates but forget how bad the government deficits are and that the only way to keep moving forward is to print more money and accelerate growth and consumption. The NDX (Nasdaq 100) has broken above its double top in Q1 2022 and could easily sweep its Q4 2021 double top next. The index is just 11% away from new ATHs, which it could achieve in 2023.
FX:NAS100Long
by BitcoinMacro