Flattening Yield Curve = Market Top??

[dmk112]

Has anyone noticed that the yield curve is flattening and this is the same effect that happened when the market topped in 2000??? I was just playing with it @ stockcharts

http://stockcharts.com/charts/YieldCurve.html

Check it out and let me know what you think - but if the curve inverts then it is probably definetly NOT a good thing for the markets...

[jiesen]

wow, dave, that's a really nifty link. I'm bookmarking it!

[IIC]

Bookmarked it too...now I gotta figure it out...thanks for that...Doug(IIC)

[New-born baby]

Mr. Greenspan

Has anyone noticed that the yield curve is flattening and this is the same effect that happened when the market topped in 2000??? I was just playing with it @ stockcharts

http://stockcharts.com/charts/YieldCurve.html

Check it out and let me know what you think - but if the curve inverts then it is probably definetly NOT a good thing for the markets...

DMK--
Here's three views of it, and I think you'll see that we are still in fine shape.
View One: how the market falls when money is too tight via higher short term rates.


View Two: how the market looks when short term rates are really low.


View Three: how life is in these United States today:


China has been buying our long term 30 yr. treasury bonds at 4% interest. Why? They are sitting on too much of our money, and have to do something with it. If they don't invest in long term treasuries here, we'll have stag-flation, and their economy is hurt. So to avoid economic suicide, they have to finance our national debt, which sustains our lavish spending. If that ever changes . . . .

My view: no sweat at this time, provided short term rates do not exceed current levels. And even if they do, we still have 2% to play with. The reason higher short term interest is bearish for the market is because people can put their money in a bank and get a guaranteed, safe return. When short term rates are low, people invest either in real estate or the market because they want a higher return on their money.

We're still okay

[IIC]

NBB...Where did you learn all that??? I rated you an 8...but I would not call that a CwH...But keep up the good work...I appreciate it...Best, Doug(IIC)

[New-born baby]

Not a cup?

NBB...Where did you learn all that??? I rated you an 8...but I would not call that a CwH...But keep up the good work...I appreciate it...Best, Doug(IIC)

Wow, Doug--is 8 good?
Now, I am rather dumb, so please tell me how that isn't a cup with handle?
Man I see a cup, handle and breakout. Look here:


Perhaps your objection is that this cup isn't above the old high of 2000?
Your friend Breakout Investor would say (at least, I think he would say) that this is a cup. When he sells lists of cup with handles, formations like this on are on it.

Best to ya, Doug Please correct me if I am wrong

[B.J]

Doug, what's the FLASH POINT of the CWH Newborn posted?

[New-born baby]

Burn my chart?

Doug, what's the FLASH POINT of the CWH Newborn posted?

BJ--
What are you saying? You want to burn my chart??????

[ninner]

if anyone reads the ibd newspaper....in the Mutual fund section...if you look at the mutual fund index...it also looks like a cup is forming which i intrepret a bullish sign that institutional investors may begin to pick up buying....I read somewhere that O'Neill likes this as well!!! sorry i cant post it so u will have to pick up a copy if you dont have it already!!!

[IIC]

I'll have to answer over the weekend...Doug(IIC)

[New-born baby]

Institutional buying

if anyone reads the ibd newspaper....in the Mutual fund section...if you look at the mutual fund index...it also looks like a cup is forming which i intrepret a bullish sign that institutional investors may begin to pick up buying....I read somewhere that O'Neill likes this as well!!! sorry i cant post it so u will have to pick up a copy if you dont have it already!!!

Ninner!
Look at the thread Market Direction. I posted today's info from Marty Chenard and he says the institutions are buying large caps in a strong way.
Small caps will follow.

[dmk112]

DMK--
Here's three views of it, and I think you'll see that we are still in fine shape.
View One: how the market falls when money is too tight via higher short term rates.


View Two: how the market looks when short term rates are really low.


View Three: how life is in these United States today:


China has been buying our long term 30 yr. treasury bonds at 4% interest. Why? They are sitting on too much of our money, and have to do something with it. If they don't invest in long term treasuries here, we'll have stag-flation, and their economy is hurt. So to avoid economic suicide, they have to finance our national debt, which sustains our lavish spending. If that ever changes . . . .

My view: no sweat at this time, provided short term rates do not exceed current levels. And even if they do, we still have 2% to play with. The reason higher short term interest is bearish for the market is because people can put their money in a bank and get a guaranteed, safe return. When short term rates are low, people invest either in real estate or the market because they want a higher return on their money.

We're still okay

yes, we're still OK, but I'm just saying we're heading to an inverted curve and by YE this is possible...

[dmk112]

MM, can we get your opinion on this? You are the economic genious that is!

[mrmarket]

MM, can we get your opinion on this? You are the economic genious that is!

I don't think you can look at the yield curve itself without also looking at where the absolute rates lie. Obviously there will be much more volatility in the short term rates and these rates tend to shape the curve moreso than the long term rates do.

In 2000 we had some serious economic slowdown occurring and that's just not happening now.

[IIC]

Wow, Doug--is 8 good?
Now, I am rather dumb, so please tell me how that isn't a cup with handle?
Man I see a cup, handle and breakout. Look here:


Perhaps your objection is that this cup isn't above the old high of 2000?
Your friend Breakout Investor would say (at least, I think he would say) that this is a cup. When he sells lists of cup with handles, formations like this on are on it.

Best to ya, Doug Please correct me if I am wrong

There are varying definitions of what a Cup w/ Handle really is...Even IBD is not consistent in their descriptions.

Generally you want to see a run up of 30%+ to make the left side high...that's the main reason I question your CwH on this one. But, even though IBD says 30%...I just found some of their examples in their Q&A where this did not happen. That's also where BreakoutInvestor and I would disagree too(even though he posts many nice one's as I've mentioned before).

Here is an example of the IBD double talk:

http://www.investors.com/editorial/editorialcontent.asp?secid=1104&status=article&id= 132267040238219&secure=30&show=1

Now...the right side high should be within 10% of the left side high....Your's is good there. The handle should retrace on low vol no more than 50% of the difference between the right side high and the absolute bottom of the cup....You are fine there as far as retracement...but I was just looking at a monthly chart and the vol was too high during that time.

http://trimurl.com/24H

The bottom of the cup should not be steep...it should be rounded...your's is too steep.

Also, we have the vol thing which your chart does not show...While the bottom is forming the volume should be generally low...As the right side high is forming the volume should be above average. The downward part of the handle should form on lower volume until the upward movement when vol should be above avg until the "FLASH POINT"(Glad at least one person remembered that I changed the term PIVOT POINT last year ) is reached when vol should be at least 1.5x ADV.

Generally, the FLASH POINT is .10 above the right side high...But I consider it at .01 above.

Like I said...there are varying definitions and even some of the one's I post at Mr. B each week are a bit of a stretch. Therefore, I consider some to be "Classic" CwH's and others...well, I never came up w/ a name for those that are close.

You'll find some sites around the net (paid and unpaid) that offer CwH's...But, some take a pretty vivid imagination...Generally, if I can't see the pattern right off the bat I don't consider it a "Classic".

Well, that's my take...Sorry to nitpick...but you asked...doesn't mean your chart is not a good pattern...but it doesn't fall into my "Classic" category.

BTW...8 is EXCELLENT

Best, Doug(IIC)