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The media pounded and pounded the yield curve’s inversion as a signal about an imminent economic recession. We have noted again and again that it is not the yield curve flattening to inversion that brings the pain, but instead, the subsequent yield curve steepener and un-inversion. From the September 17 post on the matter:
(more…)This is my first post on equities this month. My apologies for that. I’ve been getting my boys back to university. They have now both gone and summer has officially ended in my house.
In my last post I was looking at the bearish track record for Septembers in presidential election years, and we saw a sharp decline shortly after at the start of September.
I have still been doing my premarket videos every day as normal at my chartingthemarkets substack and, after that low was made I said there was a strong case for a retest of the all time highs on SPX and Dow next, at which point there would be a lovely topping setup on both, and a fail area inflection point that could deliver a big decline from there into October. Both of those all time highs have now been retested, and that really nice topping setup has formed. We are waiting for the decision on whether this will now break down within the setup or break up out of it.
(more…)I’ve used this chart repeatedly to show the bear markets that occurred in 2000 and 2007, following 2yr/T-bill yield divergences.
The symbol $SPXEW/$SPX is a ratio chart which divides the equal-weighted S&P 500 by the “normal” oh-so-heavily weighted S&P 500. It illustrates market breadth. In a perfect world, it would be a flat line, showing that all 500 stocks were moving up and down perfectly together. Instead, the ratio chart shows a severely degrading situation, emphasizing the eroding breadth of the market.
I’ve been having a good look at the longer term correlation between Crypto & equity indices and it is a strong one that has been impressively consistent over the last 8 years. The chart below just covers the last five years of SPX vs BTUSD (Bitcoin) but you can see that the upswings and downswings tend to be correlated, and going back to 2016 the big highs on both are decently matched, with a strong tendency for Crypto to turn down before equities do.
I was asked a couple of weeks ago whether this might be happening again, with Crypto having topped a few months ago and SPX, NDX and Dow all looking as though a significant high might be close. I’ve looked at that and would say that it would be more typical for the two highs to be within a month of each other, though there is a possibly comparable period as BTCUSD was forming a bull flag for ten months or so in 2019-20 with the C wave down during the 2020 COVID crash.
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