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Yield Curve: Bond Market Recession Signal


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#1 Rogerdodger

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Posted 08 March 2023 - 01:12 PM

Bond Market Recession Signal
The two-year Treasury’s yield was at 5%, far above the 3.96% yield for the 10-year Treasury. That differential, or inversion, is on pace for its widest closing level since Sept. 22, 1981, when it ended the day at 1.214 percentage points, according to Dow Jones Market Data, though it remains some 17 basis points from that level.

 

The closely-watched spread between 2- and 10-year yields this week showed a discount larger than a percentage point for the first time since 1981, when then-Fed Chair Paul Volcker was engineering hikes that broke the back of double-digit inflation at the cost of a lengthy recession.

Yeild-Curve.jpg
https://stockcharts..../yieldcurve.php

 

Deepest Bond Yield Inversion Since Volcker Suggests Hard Landing

Key Treasury yield curve hits deepest inversion since 1981 (US10Y)

Yield-Curve Inversion Is Getting Even Steeper. It's a Recession Signal.


Edited by Rogerdodger, 09 March 2023 - 12:16 AM.


#2 Rogerdodger

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Posted 08 March 2023 - 01:25 PM

1981-Bear-Market.jpg



#3 Rogerdodger

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Posted 08 March 2023 - 01:57 PM

Just out of curosity, how did GOLD do in 1981?

1981-Gold.jpg



#4 EntropyModel

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Posted 08 March 2023 - 01:59 PM

Thx for the charts/data Roger.

 

BTW - what the 'experts' are not getting ..because. they aren't actually experts but shills is that 

 - When bonds sell off ..money is coming OUT of bonds ...where does it go?  ..in my research almost 100% of time into STOCKS .

 

Thus  normally the market does NOT PEAK until AFTER bonds finished selling off ...driven up by liquidity from bonds. 

 

NOT this time as I predicted in early 2022 - why? ,.. I predicted this wouldn't happen for two reason

1. Foreign selling of bonds and repatriation AND

2. What I call 'Liquidity Repricing' - because I knew FED would have to do QT, thus some of rise in rates isn't providing liquidity just removing assets from FED ledger, and also because it removes

the artificial up pricing on stock market due to that FED provided LQ.

 

MOST of the DOWN CYCLE in STOCKS occurs AFTER bonds peak - we aren't even there yet, and TNX looks in strong upward pattern to retest highs as i've said, and even possibly new highs oh MY!

So we are still getting some LQ support from Bonds - not as much as historical data mining would expect - but once bonds do finally turn and get a bid, maybe this summer, it will remove even more LQ from stocks

and that's when I see risk of bigger down legs.

 

* in 1981 case TNX peak was coincident with the August peak into 1st big down leg - and stock then took year to find the low, this is typical of the cycle

https://mark_davidson1-yahoo.tinytake.com/msc/Nzk4MDA1M18yMTEwNDgwMQ


Edited by EntropyModel, 08 March 2023 - 02:10 PM.

Question everything, especially what you believe you know. The foundation of science is questioning the data, not trusting the data. I only trust fully falsified, non vested interest 'data', which is extremely rare in our world of paid framing narratives 'psy ops'. Market Comments https://markdavidson.substack.com/?utm_source=substack&utm_medium=email https://www.youtube.com/playlist?list=PLznkbTx_dpw_-Y9bBN3QR-tiNSsFsSojB

#5 Rogerdodger

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Posted 08 March 2023 - 03:12 PM

Your chart:

* in 1981 case TNX peak was coincident with the August peak into 1st big down leg - and stock then took year to find the low, this is typical of the cycle

https://mark_davidson1-yahoo.tinytake.com/msc/Nzk4MDA1M18yMTEwNDgwMQ

TNX.jpg


Edited by Rogerdodger, 08 March 2023 - 03:13 PM.


#6 fib_1618

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Posted 08 March 2023 - 03:12 PM

Since this thread's subject deals with the 1979 to 1983 period, I thought I would throw a chart up that might provide better overall clarity for those who may wish to do further comparisons between now and then in regard to both the debt and precious metals asset classes.

 

Fib

 

http://technicalwatc...70spx030823.png

 

1970spx030823.png


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#7 pdx5

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Posted 08 March 2023 - 04:09 PM

1976-1984-SPX.png

Focus on period between start of high inflation in 1977 and clear signs inflation was ending in 1982 with Volcker's bold interest rate hikes. SPX dropped 40%. Will it be different this time? 


Edited by pdx5, 08 March 2023 - 04:13 PM.

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#8 EntropyModel

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Posted 08 March 2023 - 04:43 PM

Thx for the charts Fib & PDX - and Roger for reposting mine appreciated!

 

My guess is PDX - that it won't be different, will be very similar to that period ...but then we will diverge later ( which wd time out to be in 2024) negatively, as

the effect i talked about in thread below occur ...  

 

At least for now this period is likely a good guide though ! for investment timeframe at least, I doubt the shorter term patterns match.

 

My read is here is we are entering another high risk period April onward to be out of investment timeframe longs - into cash and see where chips fall into October - I guess a normal 'seasonal' weak period,

 I know most are looking for the 3rd year presidential strength ... but it may only occur in the positive seasonal period ..Jan - March we've had ..and then say from an Oct low into DEc -   TBD.


Edited by EntropyModel, 08 March 2023 - 04:44 PM.

Question everything, especially what you believe you know. The foundation of science is questioning the data, not trusting the data. I only trust fully falsified, non vested interest 'data', which is extremely rare in our world of paid framing narratives 'psy ops'. Market Comments https://markdavidson.substack.com/?utm_source=substack&utm_medium=email https://www.youtube.com/playlist?list=PLznkbTx_dpw_-Y9bBN3QR-tiNSsFsSojB

#9 Rogerdodger

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Posted 08 March 2023 - 11:05 PM

I think it was Gene Inger (Original CNBC “Market Maven”) who would say something like: "we maintain this flight plan until the Ides of March, then we fly down to Houston."

 

I think I first heard of him on AOL "You've got mail" (used to be the happiest sound ever.)


Edited by Rogerdodger, 09 March 2023 - 12:12 AM.


#10 fib_1618

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Posted 09 March 2023 - 09:05 AM

A member asked me privately if I would expand the time axis on the chart previously posted in this thread since he found it interesting how the crash of 1987 stopped right at trendline support....so here you go. I guess context IS everything in this business, isn't it? Especially when you take the emotion out of it and respect the marketplace as being that of order instead of chaotic.

 

Fib

 

http://technicalwatc...80spx030923.png

 

19701980spx030923.png


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“Wise men don't need advice. Fools won't take it” - Benjamin Franklin

 

"Beware of false knowledge; it is more dangerous than ignorance" - George Bernard Shaw

 

Demagogue: A leader who makes use of popular prejudices, false claims and promises in order to gain power.

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