Market Volatility & Inverted Yield Curves | Market Update Mid-August 2019

Market #volatility continues, the yield curve inverts, which brings on #recession fears. The beginning of August has been ugly!

So this week, lots of talk about the yield curve, which brought on talk about recession and recession fears which we will talk about.


First up, we're going to talk about #bonds, because that's the big story this week. Here is a 30-year chart going back to 1980 on the ten-year Treasury. Unbelievable trend line. Remember those big rates tapping out there at about fifteen percent. And at the beginning of the year, I call this one of the most important charts. Why? Because if this trend line, were we going to break through? Wall Street was calling for it, we, on the other hand, thought differently.

I went back and looked at some of my old videos and we were calling for treasuries to go down.

Let me explain the move on the chart above all the way to the right where you see it drop...unprecedented. When you see that move just this month alone from 1.9, we broke 1.50 yesterday, closed at 1.52, that is a huge, huge move in the bond market.

So what everybody was talking about was the yield curve inversion.

Down at the bottom, we have a couple of things. One, we have our 10-year treasury, minus our 3-month treasury and you can see it's been negative since June. We brought this up a couple of weeks ago, the first time we've had a 30 day below. But the big move this week is that we're at .04, we did break it for just a little bit on Wednesday. Couple of other things on this chart before I explain that. The biggest thing this week is 1.98 on the 30-year Treasury, an all time low. Wow! That is a big move. Again, something that we do not see. Now, the importance of the yield curve is right here.

The idea is each time we've had a yield curve inversion, going below zero, 10 year, minus two year, we've had a recession.

I'm going back to 1980. There's your zero line. And then you can see what happens to the market. Whenever we have inverted we are followed by a recession, seen in the red. So here we are. We had our first inversion. Probably see it again in the near future.

So what does it mean to you as the individual investor? Well, the one thing it means is recession is not coming overnight. Historically, it's been 18 to 24 months and we don't know what's going to happen. Can the Fed have a soft landing? Possibly, but it is definitively a warning sign that we have to be careful of now.

The other thing that we saw last week was negative yields. Here's Japan. -.23, Germany, -.72. We've got 23 of 30 countries that rates are below our Fed funds rate, Again, unprecedented.

What does this mean to you as it investor? Well, the first thing is we talked about the recession. Yes, possibility it's coming, so we have to be careful. We know that equities don't do well in recessions. Now, that being said, here's the bank index.

So I had someone come in this week. They were talking with a big wire house broker, he said it's time to buy financials, great value and they're underpriced. Well, sometimes things are underpriced for a reason. mean, look at this chart right here and you can see it. That is a straight down negative. Everything I look at about banks right now, negative. Why? low rates, banks don't do well with low rates. So this is one of the things that means to you and also the overall recession. Watch. We're going to call it at this point.


Not much to say except our signal right now is negative. Pretty obvious when you look at this chart. Momentum, negative crossover and volatility is at 19. We've already crossed the 50 day moving average and your 200 day moving average, which is going to be your next level of support.


Now, what do we see here? Take a look at the channel. We broke that channel even with today's (8/15/19) move. We're down about 1.5% for the week. But the other thing that we have here is that negative crossover in MACD. So our mid-term signal is negative as well.