What's going on with the stock market? (week 6)
Long story short, we are headed for a recession, and we only need one chart to illustrate why...
(chart from cnbc)
This is the US. 10 year vs 2 year bond spread. The 2 year bond sits at 2.737% yield and the 10 year bond is at 2.893 % yield. The narrowing of this spread shows that we are closing in on a recession. The chart above goes back to 1977 and shows where the yields inverted. The most recent being the 2006 / 2007 inversion and we all know how that ended in 2008. This time we are seeing a bit more controlled narrowing, but a narrowing none the less. With an inversion of the yield curve we will see a giant sell off in the stock market. We can also see from most major indexes that the lower resistance of the downward trend no longer is providing support as most prices have fallen below the support line. All of this signals bad times ahead for the market.
My current goal is to wait for a few possible catalysts that could provide a change to escape this downtrend. 1) The fed raising this week, then signaling a pause in rate hikes. 2) A trade deal with China. 3) An incredible earnings report in January, set up by conservative guidance in the previous quarter.
Also here's a disclaimer that you should read:
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