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Yield Curve Inversion no longers matters


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#1 q4wer

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Posted 21 August 2019 - 11:09 AM

Date 1 mo 2 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr

08/01/19 2.11 2.14 2.07 2.04 1.88 1.73 1.67 1.68 1.77 1.90 2.21 2.44

08/02/19 2.11 2.12 2.06 2.02 1.85 1.72 1.67 1.66 1.75 1.86 2.16 2.39

08/05/19 2.07 2.08 2.05 1.99 1.78 1.59 1.55 1.55 1.63 1.75 2.07 2.30

08/06/19 2.05 2.08 2.05 2.00 1.80 1.60 1.54 1.53 1.62 1.73 2.03 2.25

08/07/19 2.02 2.04 2.02 1.95 1.75 1.59 1.51 1.52 1.60 1.71 2.01 2.22

08/08/19 2.09 2.07 2.02 1.96 1.79 1.62 1.54 1.54 1.62 1.72 2.02 2.25

08/09/19 2.05 2.06 2.00 1.95 1.78 1.63 1.58 1.57 1.65 1.74 2.03 2.26

08/12/19 2.09 2.06 2.00 1.94 1.75 1.58 1.51 1.49 1.56 1.65 1.92 2.14

08/13/19 2.05 2.04 2.00 1.96 1.86 1.66 1.60 1.57 1.62 1.68 1.94 2.15

08/14/19 1.98 1.98 1.96 1.92 1.79 1.58 1.53 1.51 1.55 1.59 1.84 2.03

08/15/19 2.08 1.97 1.91 1.86 1.72 1.48 1.44 1.42 1.47 1.52 1.80 1.98

08/16/19 2.05 1.95 1.87 1.85 1.71 1.48 1.44 1.42 1.49 1.55 1.82 2.01

08/19/19 2.06 1.96 1.94 1.90 1.75 1.53 1.49 1.47 1.54 1.60 1.88 2.08

08/20/19 2.05 1.96 1.94 1.89 1.72 1.50 1.44 1.42 1.49 1.55 1.84 2.04

 

 

https://www.treasury...aspx?data=yield


Edited by q4wer, 21 August 2019 - 11:10 AM.


#2 q4wer

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Posted 21 August 2019 - 11:11 AM

Big swings to kill both bulls and bears,

they always have some excuse.



#3 fib_1618

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Posted 21 August 2019 - 12:00 PM

This is all just a distraction manufactured by the (frustrated...if not going insane) media branch of the Democratic party...pay it no mind.

 

Fib


Better to ignore me than abhor me.

“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.

Technical Watch Subscriptions



 


#4 alexnewbee

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Posted 21 August 2019 - 12:47 PM

Yeah, this time is different ;)
"we do G.d's work" Lloyd Blankfein

#5 alexnewbee

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Posted 21 August 2019 - 12:48 PM

Big swings to kill both bulls and bears,
they always have some excuse.


Why kill? It depends on your trading.
"we do G.d's work" Lloyd Blankfein

#6 MikeyG

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Posted 21 August 2019 - 07:36 PM

This is all just a distraction manufactured by the (frustrated...if not going insane) media branch of the Democratic party...pay it no mind.
 
Fib



They are so desperate that maybe talking about recession will bring one on!

There talking points will soon fade as the markets make new ATH's!

mdgcapital@protonmail.com  

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"One soul is worth more than the whole world." 


#7 robo

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Posted 22 August 2019 - 08:10 AM

This is all just a distraction manufactured by the (frustrated...if not going insane) media branch of the Democratic party...pay it no mind.

 

Fib

LOL....  The IWM index tells me it's more then just the  Democratic party  However, I trade the trend and none of the guessing that goes on here or on the news,  means anything  to my trend trading system. What causes my system to move up and down is out of my control.   I just trade what I see not what i think.... With that said,  I'm close to buying VXF again.... All this does matter to LT investors, but I'm a trader not a LT investor.... LT capital gains are important to many so I can see why they have to try and front run the herd....

 

Good Trading

 

LT data

 

https://stockcharts....392&a=680489791

 

ST trading data..

.

https://stockcharts....352&a=683482120

 

Gold/Miners - It's been a nice run for this move.... I always enjoy looking over your work....

 

https://stockcharts....002&a=683481545

 

Recessions are good for trading ( bad for investors) and do a good job of popping the Wall Street/ Fed  bubbles....

 

 

Have a nice day...


Edited by robo, 22 August 2019 - 08:19 AM.

“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”   Jesse L. Livermore


#8 fib_1618

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Posted 22 August 2019 - 10:58 AM

 

This is all just a distraction manufactured by the (frustrated...if not going insane) media branch of the Democratic party...pay it no mind.

 

Fib

 

LOL....  The IWM index tells me it's more then just the  Democratic party

 

To be sure there are other economic and geopolitical factors involved here, but the main problem is a lake that's "swamped" with "resistance" when attempting to keep a country's independent sovereignty in a greater global theater...especially when this "push back" is actually working, these same factors squeal the loudest.

 

Fib


Better to ignore me than abhor me.

“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.

Technical Watch Subscriptions



 


#9 robo

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Posted 22 August 2019 - 11:20 AM

 

 

This is all just a distraction manufactured by the (frustrated...if not going insane) media branch of the Democratic party...pay it no mind.

 

Fib

 

LOL....  The IWM index tells me it's more then just the  Democratic party

 

To be sure there are other economic and geopolitical factors involved here, but the main problem is a lake that's "swamped" with "resistance" when attempting to keep a country's independent sovereignty in a greater global theater...especially when this "push back" is actually working, these same factors squeal the loudest.

 

Fib

 

I agree with you.....  Crazy times indeed! Some good trading coming our way in my opinion. Even "IF" the market just thinks the Democratic party will sweep there will be some crazy selling. I have NO OPINION on this.   I just trade what I see.

 

Inflation Before Recession - Buy Energy Shares  
Summary

The media believes that the U.S. economy is heading for an imminent recession.

 

A primary flaw in this reasoning is that U.S. equity bear markets for more than two centuries have followed a reliable pattern in which events occur in a certain sequence.

 

This order of operations has a resurgence of inflation occurring well before the U.S. economy experiences negative GDP growth which defines a recession.

 

https://stockcharts....392&a=680489791

 

Rallies for commodity producers beginning with precious metals and usually ending with energy are also consistent and repeatedly misinterpreted by investors each

time we are in a new U.S. equity bear market.

 

Kaplan

 

https://seekingalpha...y-energy-shares

 

As the media become increasingly insistent upon an allegedly imminent U.S. recession, the most-experienced top corporate insiders are betting on rising inflationary expectations.

 

You can get a free email near the end of each calendar day from j3sg.com, detailing all insider buying and selling which was reported earlier that day. I have been scanning these especially closely in recent weeks, even going to the web site on an intraday basis as I did today to see whether insiders are continuing to aggressively accumulate shares of companies which will benefit from a lower dollar and rising U.S. inflationary expectations. Not only has it been continuing but it has been intensifying in recent trading days, with buying emerging from executives who usually only make purchases near historic intermediate- and long-term bottoms. The heavy overall insider selling from July 2019 has mostly subsided, no doubt because executives who were eager to sell near all-time highs are much less excited about doing so after the recent sharp U.S. equity correction. As inexperienced investors are getting increasingly nervous and more likely to log into their accounts, thereby making them more likely to act emotionally, insiders retain a strict discipline no matter what the financial markets are doing. Multi-year and multi-decade extremes in other indicators including net fund outflows from unpopular sectors, unusually intense commercial net accumulation as demonstrated in the weekly traders' commitments, and media sentiment have been transmitting increasingly clear confirming signals.

 

I expect a Democratic sweep to occur in the November 3, 2020 U.S. elections primarily for economic reasons.

 

Investors are far underestimating the impact of Democrats regaining the U.S. Presidency, Senate, and House of Representatives near the end of next year. You can be certain that higher corporate taxes, liberalized Schedule A deductions, and probably the highest marginal tax rates since 1980 will have a major and mostly negative impact on U.S. asset valuations:

|
 
 
 

Edited by robo, 22 August 2019 - 11:25 AM.

“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”   Jesse L. Livermore


#10 robo

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Posted 22 August 2019 - 06:45 PM

Chart In Focus

Inverted Yield Curve, and Small Caps

 

Russ_2v1_10-3yield_spread_fwd_Aug2019.gi

 

August 22, 2019
 

The whole media world is abuzz lately with talk of the inversion in the yield curve, and what it means for a potential recession.  The track record is mixed there, and there is much debate among academics about whether it is “different this time”.  But there is one very reliable effect associated with yield curve fluctuations which we can talk about.

In the chart above, I’m showing the relative strength ratio for the Russell 2000 Index versus the Russell 1000.  Also in the chart is the spread between the 10-year T-Note yield and the 3-month T-Bill yield, which is one of the common ways of showing the “yield curve”.  The trick in this chart is that the yield spread’s plot is shifted forward by 15 months in order to show how the R2/R1 relative strength ratio tends to follow in the same footsteps after that lag time. 

 

This is relevant now because the R2/R1 relative strength line has been moving lower, indicating that small cap stocks have been underperforming large ones on a relative basis.  And the continued drop in the 10-3 spread says that this underperformance of the small caps is likely to continue for the next 15 months. 

 

This leading indication relationship has not always worked perfectly, and so that is a risk factor for anyone wanting to use it.  When the Fed gets really crazy, the relationship goes off track a bit.  We saw that with the Y2K spike in small caps, which was fueled by the Fed trying to stuff extra liquidity into the banking system just in case anything went wrong with all of the computers in the whole world. 

We also saw that when the Fed started the QE3 program, with massive injections of liquidity into the banking system, they were able to ward off what should have been a dip in small cap relative strength.  Once QE3 started winding down in late 2014, the relationship got back to normal.

 

So it is a reasonable question now about whether the Fed’s current restrictive stance on interest rates is going to skew this relationship again.  I’ll have a definitive answer to that question in about 15 months.

There is another relationship which is part of this dynamic and which is worth mentioning.  The relative performance of small caps versus large caps is also related to the movements of the price of gold, or at least that is the case most of the time.

 


Edited by robo, 22 August 2019 - 06:45 PM.

“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”   Jesse L. Livermore