Recession indicator #2 Just realized that measuring the spread between TVC:US02Y and FRED:FEDFUNDS gives you a pretty accurate heads up of looming recessions. We might be in one from a few months now.
Fundsrate
Study of DXY, Gold, and Fed Fund Rates using 200MA indicatorBlack line: DXY (U.S. dollar index)
Green line: DXY 200 week moving average
Yellow line: GC (Gold futures)
Blue line: DFF (U.S. Federal Funds Effective Rate)
Since 1971 when U.S. dollar went off the gold standard, there have been 6 instances when the DXY crossed below its 200 week moving average while it was rising. At closing on 27 September 2024 was the 7th instance of this DXY crossing.
Of interest:
Performance of gold when DXY crosses below, until DXY reaches a local minimum. Results are highlighted in purple boxes.
Of the 7 instances, interest rates were rising in 4, flat in 1, falling in 1, and presumed to be falling in the current scenario. The only rising rate period was 1985-92, when gold had a very marginal 4% gain. This was notably on the backside of the 1970's high inflation period. Technically, gold showed gains in all but 1 of these historical periods, with 1994-95 showing a 2% loss.
Conclusions:
1) DXY trend reversal downward is not always, or often, associated with a U.S. interest rate cutting cycle nor is it strongly correlated with gold price gains.
2) The start of a U.S. interest rate cutting cycle is not predictive of gold price gains.
VIX - is the sell 20, buy 30 strategy done?Throughout 2022 you would have done VERY well taking profit when the TVC:VIX hit 20 and accumulating when the VIX hit 30. But has this trend concluded? This movement and profit/accumulation opportunity is consistent with the most recent tightening from 2017 to 2018 where fed funds were rising, and the yield for 2 year treasuries in the bond market exceeded fed funds. When the yield for 2 year treasuries fell below fed funds the VIX remained below 20 until covid hit. The VIX spiked during covid and consistently descended while the market expanded. This pattern is only observed in the most recent cycle and not something that we see consistently repeated historically. If the 2 year remains below fed funds, should not expect the VIX to range between 20 to 30 or will 20 to become the ceiling?
BTCUSDIn the daily time frame, with increasing expectations of a 0.25% increase in interest rates or even keeping it constant due to the financial crisis of banks in America, Bitcoin will cross the heavy resistance of 25,000 and at the level of 28,500 in lower times, we can see the weakness of the trend, which can indicate The market rest for the next move according to today's economic data and Powell's speech.
If the level of 25000 is rejected, it can be the key support for the correction to continue the upward trend, but with the positive impact of the result of tonight's session, the levels of 32000 and 38000 are the next targets of this accelerated movement, which seems to be different from the very bullish expectations. In the market, it is necessary to continue the upward movement of a correction, which Mr. Pavel can have a surprise for the market. (You have to see if he has the phone in his hand or not 😉)
Fed decisions boost the USD trendThe Fed raised its funds rate by 75 basis point to a target range of 3.00% - 3.25%, its highest since 2008.
DXY remains bullish, even technically, supported by a rising trendline, 20 and 50 SMA on D1.
Even if the RSI starts showing overbought signal with bearish divergence, and Bollinger bands upper limit reached, it isn't in this case a sell signal: strong momentum brings traders into this trap.
Wait for RSI to cross below the 14 SMA as described on the chart to start looking for a correction.
Measuring the corrections shows us strength recently in the momentum ( smaller corrective waves ).
Measuring the impulsive wave shows us that the uptrend hasn't reached yet it's logical goal.
With the good news on the USD, the index can reach the 114 level.
Goodluck,
Joe.
BTCUSDTAccording to the previous analysis, Bitcoin is pulling back to the midline of the ascending channel in the range of 21500 to 21700 after breaking its main support areas, and on the other hand, it is facing the middle resistances of the fork and the 1-hour trend line, and since it has been able to more than from 50% of the previous rising wave, it is more likely to continue the downward trend to the bottom of the channel around the psychological range of 20000, which is symmetrical with the main middle line of the fork, but considering the return from the 0.618 Fibonacci level, if it crosses the 21700 resistance range Its main level is 23,000, and upon its failure, the confirmation of the start of the upward rally up to the range of 28,400 is issued.
Today, the main economic data is the announcement of the interest rate increase for the fifth time in 2022, which increases or decreases the rate 8 times a year.
According to most experts, this rate increase will be 0.75% and will bring the interest rate to 2.5%, and as it is clear in the interest rate graph, 2.5 is the interest rate ceiling in 2019, but if the Federal Reserve Like the European Union, there is a surprise on the way and it increases the interest rate by 1%, this resistance has been broken and it can grow up to the previous ceiling of 5% that happened in 2006-2007 (that is, technically at this level? 😁)
On the other hand, yesterday's economic data, which was the index of consumer confidence and the sale of newly built houses, was significantly lower than the previous period and the expectations of experts (it should be noted that Mr. Biden, who these days has improved the good behavior of the locksmith 😜), it was announced that this data shows a decrease There is a strong demand in the market, and this can be the factor influencing the further increase of the interest rate by the Federal Reserve, because the main determining factors in the American economy are data, not leadership and oversight, and the Federal Reserve and the government operate independently.
With these words, in general, it is more likely that the market will continue to fall, although we are in the most difficult market conditions and new data can affect the market conditions at any moment.
