supratimbarman

US10Y - US02Y -- Yield Curve Cycling Lower

Short
This is a Weekly Chart of the US10Y yield minus the US02Y yield. (This composite is sometimes referred to as the Yield Curve and if the spread or difference goes below 0.000 , then that phenomena is termed to as Yield Curve Inversion).

This spread is widely followed worldwide as any number below or close to 0 tends to indicate impending slowdown in the US Economy, (which is the world's largest) and thus the most important.

You will notice that the Yield Curve tends to cycle and that the initial low point, marked as Point 1, was in 1989; when the US Economy suffered a total collapse in domestic manufacturing and started to initiate the concept of outsourcing manufacturing, particularly semiconductor fabrication to Taiwan, heavy shipbuilding to South Korea and automobiles and domestic electronics to Japan.

The fall of the Berlin Wall in 1990, which was joyfully called the "End of History" was when US Corporations found themselves in the unique situation of no longer having to give in to their workers demands for unionization and normal humane conditions; in order to pacify them and have them stop demanding the same work and social security conditions of their fellow workers within the Soviet system meant a boom till 1992. Those workers did not have a leg to stand on from 1990 onwards.

Point 2 is the dot.com crash of 2000, Point 3 is the Great Financial Crisis or GFC and the collapse of the Mortgage Backed Security or MBS global housing market in 2006/07.

These two events were frantic attempts to keep the US Reserve Currency system afloat as well as to inflate the US Stock Markets and keep failing corporations commercially viable. This was achieved by the total and absolute destruction of Iraqi Society and subsequently the total annihilation of Libya as a functioning sovereign nation, in order to keep the Petro-Dollar system concurrent.

We are now approaching Point 4, which is a Currency Crisis and a collapse in the US Dollar or the USDX or DXY . This will lead to a massive convergence towards digital currencies and IMF/World Bank sponsored attempts to replace fiat. The question remains; will the debt burden of those same workers within capitalism be written off and if so, will that be initiated via a Bernie Sanders led Administration in the US before the situation gets totally out of hand.
Comment: One of the things to bear in mind , is, that there is a delay before the Index does eventually dip and the subsequent fall is not immediate upon Curve Inversion.

With that in mind, I have included the Weekly SPX Chart below with the corresponding falls after Curve Inversion marked in.

Comment: When you look at the above Chart, you will notice that the corresponding RSIs at each point during Curve Inversion is at a maximum or near-max peak and the RSIs then trend to a minimum during the SPX dips in Oct90, July02 to Feb03, Feb09.

There is a huge spike in the RSI during Jan18 but the Yield Curve had not inverted. The fall in the SPX with the RSI at a min during Dec19 is a technical correction, unrelated to Yield Curve Inversion.

Also you will notice that as the Curve Inverts, the MACD Structure begins to slide towards 0 and below, with a final trough at the SPX Index low itself.

So putting the Curve Inversion in context with the falling MACD Struct and the RSI peaking, seems to provide and early indication of an Index Correction.
Comment: I also include the DJI Weekly Chart and you can see the similar occurrences of the Index trending to an ATH during Curve Inversion followed by a Correction, which are also predicted by a corresponding rise in the RSI during Inversion and the start of a fall in the MACD Struct

Comment: I link in the CBOE VIX Futures quotes, which you will need to refresh as per their requirement.

http://www.cboe.com/products/futures/vx-...

http://www.cboe.com/delayedquote/futures...

You will notice the 21st Oct Vix Expiry at 20.55 which is far higher than the Vix quotes prior to Oct as well as higher than the Nov Fix.

The important US Elections conclude in November. Is the market indicating some sort of unexpected outcome.
Comment: To bolster my point made on the 23rd of Feb, this is a snapshot of the SPX Weekly Chart starting the 24th of Feb and ending the 28th of Feb. It seems to support my observation that the Index will ATH during Curve Inversion and then start to correct.

Comments

supratimbarman Simon_says
@Simon_says, Thank you for pointing out the link between the Interest Rate Cuts and collapsing US yields.
+1 Reply
you should add spx chart at bottom to give a better view how the yield curve impacts the markets
Reply
supratimbarman GUMBY9662C
@GUMBY9662C, good point. will do that. thank you.
Reply
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