Millennial Macro

If you have not looked at the charts from the prior two posts please do so.  Without providing too much verbiage, let the charts do the talking.   In these charts: Blue lines marks the daily support/resistance. Yellow marks weekly support/resistance. Red marks monthly support/resistence. These represent multiple timeframes and for a support/resistance to flip (a potential trend change in that timeframe), a close must occur in that window.  For example, for the daily trend to change, the closing price must be above the support/resistance line.   The strategy employed by this writer is simple as mentioned in nearly every post for months:  If the price closes above/below a specified level denoting a trend change, a buy/sell is made in that timeframe.  Stops are placed below daily support, weekly support, monthly support using the timeframe just below it (daily trend uses an hourly stop, weekly trend uses a daily stop). Buy orders are placed when the trend closes

Due to family commitments, this post almost exclusively focuses on the price action following a historic week in global markets.  Time permitting and after some reflection, next month's post will provide fundamental thoughts on how a supply shock risks creating a demand shock and why the Fed must mitigate the risk of recession by following market interest rates lower.  However, for now attention will be squarely placed on the charts. The 10-year treasury yield has finally closed below the 1.3% on a weekly and monthly basis. As mentioned in almost every monthly post since December 2018, the monthly trend is down and should be respected. With that said, the 10-year yield has collapsed a whopping 58% in 12 months.   This is a historic drop and is stretched by almost any measure.  Even during this secular decline in interest rates that began nearly 40 years ago, such 12-month declines usually produce significant rebounds before proceeding lower. The bullish US dollar Index

At the end of January 2019, the 10-year treasury yield stood at roughly 2.7%.  Fast forward 12 months later, and the 10-year yield has dropped to below 1.5%.  In other words, this is a 44% collapse in one year which helped usher in an epic bond rally.  Having just occurred, how does this dive in the 10-year yield compare to past periods and what does this reveal about the likely path forward in long-term rates?  Looking back to 1963, this posts will review other times where the 10-year treasury rate rose or declined by at least 20% on a year-over-year basis (monthly closing basis).  Doing so will hopefully provide context as to how far long-term rates have dropped in such a relatively short period of time. (*The blue line is the 12-month rate-of-change of the 10-year treasury yield while the black line is the absolute level.  The dotted red and green lines are the +20% and -20% year-over-year (YOY) thresholds that will be used throughout this post.) 1963-1979 Unsurprising

Following a 2019 in which risk and interest sensitive assets rebounded after a severe global bear market in 2018, is 2020 the year of reflation?  Before answering this question, a review of 2019 is necessary. January 2019: Correction or just the first leg of a big bear market? "...whether global equity markets have already put in their respective lows for prolonged period or if panic does occur, this environment has the potential to wrong foot inflexible bulls and bears alike creating the tinder for explosive moves in either direction." April 2019: Global bonds continue their rise as the Fed pauses "...current market conditions still requires that market participants remain flexible even if a bias toward optimism continues to be favorable." June 2019: What a difference a year makes "...unlike much of 2018, the necessary conditions for a sustained breakout and uptrend in risk assets are in place today." Oct 2019: On the Cusp of Recession or Recov