US02Y Next Move The matter still requires deeper analysis, despite the absence of wide-ranging movement today. The recent decline in bonds did not help boost gold prices. The yield on the two-year US bond is currently at a support level of about 4.8% on the one-dimensional chart and may look to rise. If the Federal Reserve maintains a tight policy, gold may struggle to rise. However, if we begin to receive signals indicating that the Federal Reserve may wish to continue lowering interest rates this year, gold may be more optimistic.
We should monitor the level of two-year and ten-year bonds, the direction of the dollar index, and geopolitical aspects to be clear about the direction of gold.
US02Y trade ideas
When the 2s/10s Chart Goes Red The Market is Dead $US02Y $US10YAs you can see there is a strong correlation between this predictive chart algo and the bond market steepening predicting the recession before the reason why. Now maybe this time is different. Maybe the massive stimulus during covid will give a false positive here. I just doubt it.
Nasdaq, Semiconductors, Natural Gas, Bitcoin: FOMC reviewDiscussing the sell off in semis today.
Potential reversal in Nat gas
Bitcoin & crypto selloff.
FOMC tomorrow: No rate cut.
Will Powell come out hawkish tomorrow? its looking likely he will based off of the BOJ rate hike. Oil surging doesn't help the dovish case.
Commodities breaking out doesn't help the inflation fight.
Huge divergenceSo when we examine this relationship closely its clear that SPX does not nessisarily follow the dictates of the inverted yield curve (2y / 10y). However, the general adherence to trends has clearly diverged in a big way. We can look back to January of 2023 and see a similar divergence where SPX finaly reacted with a violent move down into March of 2023. I think we need to watch very closely for a similar reaction. The market has once again priced for perfection, we all know its not perfect. Employment, GDP and earnings are still supporting higher rates, and unless the current administration has real influence over the Fed - there will be no rate cutting in the near future. Still the elimination of QT may even have a larger affect on the markets. Stay tuned, be safe out there.
This Time is Different (so far)An inversion between the 2yr UST yield and the Federal Funds effective rate normally does not exceed -1%. When that happens, it's an indication the bond market is not getting the reaction from the Fed that it "expects" (or maybe it is a "want"). Inversions of this degree have normally been unkind to the equity market, but that is clearly not the case here in late 2023. Something to keep an eye on as the calendar turns to 2024.
US 2 and 10 Years Yield for evaluating the recession riskPlease note that these are my premature ideas. I don't claim any certain things.
I just evaluating the Technical Charts, which are important indicators to me for unknown upcoming global events.
I added my comments on the charts with text boxes. I am sure that you can also understand what is going on.
2Y Yields LowerTVC:US02Y
2Y Yields heading lower.
Sometime over the next 12-18ish months, I believe we'll see 2Y yields fall to 200-275 bps.
Headline inflation numbers are lower and dropping.
The Fed has effectively pulled a rabbit out of a hat in the act of raising interest rates by ~500+ bps, while avoiding the obliteration of the economy. (thus far)
If the economy does falter in the coming months; the Fed will lower rates.
(No further explanation needed)
Despite the endless repetition of "higher for longer" from Fed officials; I believe that the Fed will lower rates even if the economy and markets remain strong.
The establishment powers in the political & financial world's that the Fed straddles both crave the same thing... Cheap Debt.
In addition to this, there are over $34+ Trillion reasons to lower rates as soon as possible.
Not to mention, the upcoming election...
The market is anticipating lower yields as well.
We're seeing the market preemptively increase exposure to interest rate sensitive assets.
(i.e. - tech stocks, indices, cryptos, beaten down govt bonds, etc.)
On a technical basis, the weekly chart of 2Y Yields is showing substantial bearish divergence.
Weekly RSI shows a bearish RSI Swing Rejection (March '23 and October '23 highs)
The 50% & 61.8% Fib levels give us a target of 200-275 bps.
The median line set suggests that yields could arrive at the target area sometime between May '24 - May '25.
Conclusion: Short Yields.
Fat_Fat