An Uncanny ObservationThe last two major stock market retracements occurred in 2000, and in 2007, respectively. Each of these was assigned an underlying cause and an overarching title. Yet, it could just be that both of these were caused by the same de facto trigger; rather than the convenient set of societal circumstances surrounding each at the time.
Nomenclature and true cause aside, there seems to be an uncanny mechanism embedded in our broader financial market system that can be actualized when described in time units. That is, the number of calendar days in between the first local instance of US Government Bond yield curve inversion and the next major corresponding top of the S&P 500 Index is strangely consistent, at least when comparing the lead-time between that of the 2000 Tech Bubble and the 2007 Mortgage Crisis.
Approximately 640 Calendar Days (440 Trading Days) separate the first day that the 10-Year/2-Year rate inflects and the subsequent orthodox high of the equity markets.
Now, it is fairly known that since 1955, this 10Y/2Y yield inversion has set the stage for an incumbent recession. In fact, there hasn't been an instance where such an inversion did not lead to a significant pullback in equity prices 6 months - 2 years thereafter.
While this fact above is astonishing, in and of itself, the observation regarding the two most recent equity crashes is almost too weird to accept. However, what would be even more extraordinary is if it proved out for a third time in a row. It just so happens that the same yield inversion occurred for three days in a row back in late August of 2019. When you add ~640 calendar days to this date, you arrive at a two-week date range that starts on 05/26/2021 and ends on 06/04/2021.
That means that if the uncanny pattern, is in fact, uncanny, then we should expect a major market top to have already occurred last week or that will occur by the end of this week. We would then also have to expect a major, subsequent selloff - the likes of which have only transpired twice in the past 20 or so years.
Time will tell.
-UncannyPig
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