The spectrum of a bear market always hovers on the financial markets, especially the stock markets and the bond market because that is where the dreaded contagion effect will come from. We all know that theoretically the stock market is positively correlated with the bond market, at least at 80% since the logic of the markets therefore explains, that the bullish progression of stock markets is in line with the ease of access to Credit which is therefore observed in the Bond Market. In other words, the more companies have the facility to borrow in order to stimulate their growth and finance their production costs at low rates, and the more it performs, and the more debt continues at low rates, and the more it creates a bond bubble Speculation based on keeping low rates. What the financial sphere at so called ''EASY MONEY''ou helicopter money ' '. Except that at one time or another, overheating starts, and it will smell burnt. Companies face disparities in their level or capacity for actual production vs. their potential or anticipated productions. And That's where Evil comes from because, when you realize that real production is much less than you hoped or anticipated, based on a low-rate loan to be able to finance its production activities, we're all just in the poop!.
However, the correction of the Bear Market expected for the reasons I have just mentioned will not be the beginning of the recession; But rather a deep breath of the mad bullish run, which the equity markets have started since the Trump government's accession to Power. The markets have fed on expectations based on its program of taxation and deregulation of the banking sector. The big bosses of the SP & 500 and the DJIA30 thought that with President Trump's tax gifts, This would allow them to finance their production Costs. They ignored the FED completely with its monetary tightening policy program begun since 2014. And today it seems to catch up with them!
FUNDAMENTAL FACTOR: abrupt increase or overrun of the BTP-BUND spread 10 years beyond 3.50% + increase in the ratio of Italian and German bond yields 10 years + increase in US interest rates + increase in VIX (Bear Market, Major correction Risk)
TECHNICAL FACTOR: at the level of the 10-year German - Italian ratio, we see that one has come down from a bullish channel but it is likely not to do its theoretical objective since it seems to validate a double bottom which would strengthen a bull signal that was at the Bear base When we got out of the Canal. If this scenario materializes, it is also possible to see that the SP500 break its yellow line of peak of its tendency, and also with its summit channel to aim its theoretical objective illustrated on the Graph. As you will have understood they are inversely correlated. One shows a performance of + 84% (SP & 500) and the other-83% (DE10YT/IT10YT)
However, the correction of the Bear Market expected for the reasons I have just mentioned will not be the beginning of the recession; But rather a deep breath of the mad bullish run, which the equity markets have started since the Trump government's accession to Power. The markets have fed on expectations based on its program of taxation and deregulation of the banking sector. The big bosses of the SP & 500 and the DJIA30 thought that with President Trump's tax gifts, This would allow them to finance their production Costs. They ignored the FED completely with its monetary tightening policy program begun since 2014. And today it seems to catch up with them!
FUNDAMENTAL FACTOR: abrupt increase or overrun of the BTP-BUND spread 10 years beyond 3.50% + increase in the ratio of Italian and German bond yields 10 years + increase in US interest rates + increase in VIX (Bear Market, Major correction Risk)
TECHNICAL FACTOR: at the level of the 10-year German - Italian ratio, we see that one has come down from a bullish channel but it is likely not to do its theoretical objective since it seems to validate a double bottom which would strengthen a bull signal that was at the Bear base When we got out of the Canal. If this scenario materializes, it is also possible to see that the SP500 break its yellow line of peak of its tendency, and also with its summit channel to aim its theoretical objective illustrated on the Graph. As you will have understood they are inversely correlated. One shows a performance of + 84% (SP & 500) and the other-83% (DE10YT/IT10YT)
Francois Abley