SPX/DJI: A Peculiar Correlation
Güncellendi
Price action discounts everything.
The most important included. It discounts prejudgement.
Price discounts everything every time...
...except when we don't want to allow it to change our hypotheses.
High yield rates are synonymous with recession.
We are convinced that high yield rates is the thing the majority hates.
From this chart above, we conclude that this may not be happening after all...
The majority (500 SPX companies) is growing against the minority (30 DJI companies) in periods when yield rates consistently rise.
Everything is relative. Recession is relative. Bubbles are relative.
A Big-Tech bubble was formed throughout the last two decades.
Now, in a high-yield environment, this bubble is fed using derivatives.
With incredible correlation, as yield rates increase, the relative density of QQQ derivatives increases. While this is an experimental calculation, only QQQ is showing this kind of derivative filling. SPX and DJI show more stable behavior.
Given that in DJI most companies are Big-Tech, the following chart comes up to prove the long-term fundamentals of big vs small.
Curiously, yield rates target a range of about 8%, similar to the inflationary highs.
Inflation seems to be calming. Many wish rate cuts...
A rate cut schedule however may signal the beginning of a recession for the US.
Cutting rates will push bond prices higher. Thus, a money outflow from equities and into bonds is created. This outflow will be a cause for SPX weakness.
As the SPX*yields chart suggested, a near-term recession may be coming.
For the following few years, SPX seems strong as the yield-SPX/DJI correlation showed.
It can take decades though for balance to shift decisively.
We need both oscillators to get bearish for a convincing move.
While Buffett advised investing into oil, but not all oil is the same...
(High yield rates for the US will drive prices lower. Yield-SPX correlation points us to SPX bullishness in a high-yield environment)
In a progressively higher-yield environment, the outflow from bonds and into equities can get immense.
A US debt default will outright crash bond prices, aiding the potential for SPX to move higher.
Not all is well for the US though. Money is already seeking other ventures...
Don't fall for the news-driven trap.
Tread lightly, for this is hallowed ground.
-Father Grigori
P.S. A US Default might not be as light as I describe.
Who knows how big the scale of such an event might be...
P.S.2. I am posting a link to the indicator I am using:
It is highly experimental, but I am beginning to get a good grip of it. Many adjustments may follow. This indicator can be used in any timeframe, and in charts of any scale.
The most important included. It discounts prejudgement.
Price discounts everything every time...
...except when we don't want to allow it to change our hypotheses.
High yield rates are synonymous with recession.
We are convinced that high yield rates is the thing the majority hates.
From this chart above, we conclude that this may not be happening after all...
The majority (500 SPX companies) is growing against the minority (30 DJI companies) in periods when yield rates consistently rise.
Everything is relative. Recession is relative. Bubbles are relative.
A Big-Tech bubble was formed throughout the last two decades.
Now, in a high-yield environment, this bubble is fed using derivatives.
With incredible correlation, as yield rates increase, the relative density of QQQ derivatives increases. While this is an experimental calculation, only QQQ is showing this kind of derivative filling. SPX and DJI show more stable behavior.
Given that in DJI most companies are Big-Tech, the following chart comes up to prove the long-term fundamentals of big vs small.
Curiously, yield rates target a range of about 8%, similar to the inflationary highs.
Inflation seems to be calming. Many wish rate cuts...
A rate cut schedule however may signal the beginning of a recession for the US.
Cutting rates will push bond prices higher. Thus, a money outflow from equities and into bonds is created. This outflow will be a cause for SPX weakness.
As the SPX*yields chart suggested, a near-term recession may be coming.
For the following few years, SPX seems strong as the yield-SPX/DJI correlation showed.
It can take decades though for balance to shift decisively.
We need both oscillators to get bearish for a convincing move.
While Buffett advised investing into oil, but not all oil is the same...
(High yield rates for the US will drive prices lower. Yield-SPX correlation points us to SPX bullishness in a high-yield environment)
In a progressively higher-yield environment, the outflow from bonds and into equities can get immense.
A US debt default will outright crash bond prices, aiding the potential for SPX to move higher.
Not all is well for the US though. Money is already seeking other ventures...
Don't fall for the news-driven trap.
Tread lightly, for this is hallowed ground.
-Father Grigori
P.S. A US Default might not be as light as I describe.
Who knows how big the scale of such an event might be...
P.S.2. I am posting a link to the indicator I am using:
It is highly experimental, but I am beginning to get a good grip of it. Many adjustments may follow. This indicator can be used in any timeframe, and in charts of any scale.
Not
Left or Right?Choose your favorite!
Feragatname
Bilgiler ve yayınlar, TradingView tarafından sağlanan veya onaylanan finansal, yatırım, işlem veya diğer türden tavsiye veya tavsiyeler anlamına gelmez ve teşkil etmez. Kullanım Şartları'nda daha fazlasını okuyun.