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Tuesday, December 04, 2018

US Treasury Yield Curves for 2018 by Kirk

Many blame the stock markets' huge decline today on worries the yield curve (Figure 1) will fully invert. Inverted yield curves often, but not always, precede recessions. Just today the markets fell between 3.1% and 4.4% as Figure 2 below shows.  

Generally the larger the inversion the higher the odds of a recession in the next year.  
Fig 1
Today's Market Action
Fig 2
You can see from the graph above and table below that short term rates are higher than on 9/28/18 while intermediate to long term rates have fallen which is what has to happen before the yield curve inverts.  
Fig 3
A "healthy" yield curve has rates increasing with term from one month to thirty years which we do not have now.

The yield curve is reflecting fear the "Trump Trade War" will push the country into a recession.  
Fig 4
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The Stock markets, as this table shows, are down between 6.7% and 15.0% below their recent, all time peak values with the Russell 2000 small cap index down the most!
Fig 5
Don't miss out on the next buy or sell alert! 

Fig 6
Fig 7
Yield Curve Definition from Wikipedia

Saturday, December 01, 2018

Investors Intelligence Sentiment Data & 2CS vs S&P 500

Investors Intelligence Sentiment : Bulls / (Bulls+Bears) vs S&P 500 11/30/18

Sentiment is down considerably from the record highs it made early in the year when the stock market was at its peak.

Chart of Investors Intelligence Sentiment SurveyBulls / (Bulls+Bears) vs S&P500
Click Graphs for Full Size Images
Market Update

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The 2CS is doing nicely too after another great buy signal

My Last article: New Series I Bond Rates

More info at 
Investors' Intelligence Sentiment Indicator

Saturday, November 03, 2018

New Series I Bond Rates - November 2018 through April 2019

On Monday 11/1/18 the Bureau of the Public Debt announced earnings rates for Series I Savings Bonds and Series EE Savings Bonds, issued from November 1, 2018 through April 30, 2019.

Series I bond, or iBond, fixed rates are determined each May 1 and November 1. Each fixed rate applies to all I-bonds issued in the six months following the rate determination. 

The Current I Bond Composite Earnings Rate is 2.83% with a base rate of 0.50%, the highest base rate in ten years!  The Top Rate for older i Bonds is 5.96%!  (See Rates for Older Series I Bonds)

Series EE Savings Bonds will earn 0.10% per year. "All Series EE bonds issued since May 2005 earn a fixed rate in the first 20 years after issue. At 20 years, the bonds will be worth at least two times their purchase price. The bonds will continue to earn interest at their original fixed rate for an additional 10 years unless new terms and conditions are announced before the final 10-year period begins."

For more about how I Bond Rates are calculated and the new rates for older iBonds, see:

My advice: I am not a fan of Series EE savings bonds and have other recommendations in my newsletter for 100% safe, fixed income investing. I happily answer questions about fixed income and my other recommendations via email from my subscribers if what I write isn't clear or if you have something not covered and want my opinion. 
Disclaimer: I own Series I Bonds in my personal account (some have base rates of 3.0%!  I also currently have them in my Newsletter Explore Portfolio.  

Source:  Fiscal Service Announces New Savings Bonds Rates, Series I to Earn 2.83%, Series EE to Earn 0.10%
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Wednesday, October 31, 2018

State Street Investor Confidence Index Near 6-Year Low

Today State Street said their Investor Confidence Index fell 3.4 points to 84.4.  This is the lowest reading since December 2012 when it was 81.4

Graph: State Street Investor Confidence Index vs the S&P 500 

  • “As major stock indices were hitting record highs near summer’s end, there were signs that institutional investors were reducing risk exposure,” commented Froot. “As we’ve progressed into fall, equities have declined further as the VIX has doubled. In the US, this month’s sell-off erased all 2018 year-to-date equity market gains, and amid concerns about high valuations and whether earnings may have peaked, some market participants seem to be anxious over a prolonged period of risk aversion.” 
  • “The sharp downgrade our Investor Confidence Index recorded in September was one of the few early warning signs of the ensuing market turbulence that has followed. Confidence has fallen further in October and is more widespread, especially in Europe where not only are political risks rising, but growth is disappointing too. The main difference this month is that the Investor Confidence Index is no longer alone in pointing to potential vulnerabilities; business and consumer confidence are also beginning to wobble too,” commented Michael Metcalfe, head of global macro strategy, State Street Global Markets.
  • A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets.
Graph: State Street Investor Confidence Index vs the DJIA
Graph: State Street Investor Confidence Index vs the Nasdaq
  • The index is released globally at 10 a.m. Eastern time in Boston on the last Wednesday of each month. More information on the State Street Investor Confidence Index is available at 
  • pdf: Investor Confidence Declined in October by 3.4 Points to 84.4
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According to State Street,
 "The Investor Confidence Index was developed by Kenneth Froot and Paul O’Connell at State Street Associates, State Street Global Exchange’s research and advisory services business. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors."
Regional Data:

11/1/18 Update:  Fear and Greed Index shows a similar outlook.


Monday, October 29, 2018

FB- Facebook Inc. - Fibonacci Technical Analysis

Currently Facebook (FB charts) at $144.68 is sitting just above the 38.2% Fibonacci retracement level that spans the run from its all time low of $17.55 to its all-time high of $218.62.  From below, "After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback."
Click Image to see full size

This 35% decline is the largest decline since Facebook fell 53.8% just peaking at $38 after its 2012 IPO then crashing to $17.55 a few months later.
Last Blog Article:
More Info:
  • Fibonacci number
  • Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%. After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback. Fibonacci Retracements can also be applied after a decline to forecast the length of a counter-trend bounce. These retracements can be combined with other indicators and price patterns to create an overall strategy.

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Wednesday, October 24, 2018

Market Update & Sentiment Charts After Major Sell-off

Keep checking back as I add sentiment charts over the next few hours.

Markets YTD

Fear & Greed Index Closes at 6


Keep checking back as I add sentiment charts over the next few hours.

From Lakshman Achuthan at ECRI "Economic Cycles & Stock Price Corrections"

What is interesting about ECRI's growth rate downturn is it highlights periods of caution, but the market usually ended up higher before the "all clear" signal rang.  That is why I was active in taking profits at the market highs this year:

Then AFTER big declines, I add shares.

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Update 10/25/18 7:02AM PST
AAII Bulls/Bears Sentiment Chart:
Update 10/25/18 9:10AM PST
CPC Ratios

Wednesday, October 17, 2018

Tax Revenue Grows but 2018 Deficit Explodes on Higher Government Spending

The US deficit grew to $779 billion in fiscal year 2018, up 17% from fiscal 2017.  

If you check my table below, it shows receipts from taxes and tariffs grew 0.6%, 1.5% and 0.4% in 2016, 2017 and 2018.   Over the same period, government spending grew by 4.5%, 3.3% and 3.2% .  Clearly it is not the "tax cuts"  but the spending that caused the deficit to explode as the data clearly shows.

This is the largest deficit number since 2012. 

Can you imagine if your family spent like this?
Where the money came from and was spent:

In Fiscal 2018 [$ millions]:  
  • Receipts = $3,328,745 
  • Spending = $4,107,750 
  • Deficit = $779,005 

In Fiscal 2016 [$ millions]: 

  • Receipts = $3,266,775 
  • Spending = $3,852,421 
  • Deficit = $585,646 
Note how Corporate taxes fell by $95B between 2016 and 2018 while "trickle down" to the workers where the Payroll Tax (or OASDI and Medicare) grew $56B from $1,115B to $1,171B.  If you add in the gains in personal income taxes that grew $138B from $1,546B to $1,684B, you could say the total gain of $56B + $138B  or $194B in taxes from individuals more than made up for the lower taxes paid by corporations.  

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For more, read Final Monthly Treasury Statement of Receipts and Outlaysof the United States GovernmentFor Fiscal Year 2018 Through September 30, 2018, and Other Periods 

Friday, October 12, 2018

10/11/18 Market Update - Fear & Greed Index Only 5

Yesterday the markets fell enough to turn sentiment very bearish which is what we usually need for a strong rally.

Yesterday, the markets were down off their peaks roughly:
  • Dow $INDU down 7.7%
  • S&P500 $SPX down 8.0%
  • Nasdaq $COMPQ down 10.6%
  • Russell 2000 $RUT down 12.9%
The Fear and Greed Index crashing to 5 usually means the markets will be significantly higher soon.

Timer Digest Coverage of My 9/21/18 Newsletter

Needless to say, I used that cash to add to shares during the decline including one of my favorite big name US tech stocks and a beaten down international ETF!

More charts:

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