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4-Year Cycles [jpkxyz]Brief Introduction why Crypto moves in Cycles. "Crypto is an expression of Macro." The 2007-2008 global financial crisis was a pivotal moment that fundamentally transformed monetary policy, particularly in how central banks manage economic cycles through liquidity manipulation. Before the crisis, central banks primarily used interest rates as a blunt instrument for economic management. The 2008 financial crisis exposed deep vulnerabilities in the global financial system, particularly the interconnectedness of financial institutions and the risks of unregulated credit markets. In response, central banks, led by the Federal Reserve, developed a more sophisticated approach to economic management: 1. Quantitative Easing (QE) The Federal Reserve introduced large-scale asset purchases, essentially creating money to buy government bonds and mortgage-backed securities. This unprecedented monetary intervention: - Prevented a complete economic collapse - Provided liquidity to frozen credit markets - Kept interest rates artificially low - Supported asset prices and prevented a deeper recession 2. Synchronized Global Monetary Policy Central banks worldwide began coordinating their monetary policies more closely, creating a more interconnected approach to economic management: - Coordinated interest rate decisions - Shared information about economic interventions - Created global liquidity pools 3. Cyclical Liquidity Management The new approach involves deliberately creating and managing economic cycles through: - Periodic liquidity injections - Strategic interest rate adjustments - Using monetary policy as a proactive economic tool rather than a reactive one The 4-year cycle emerged as a pattern of: - 2-3 years of expansionary policy - Followed by a contraction or normalization period This cycle typically involves: - Expanding money supply - Lowering interest rates - Supporting asset prices - Then gradually withdrawing support to prevent overheating The 2007-2008 crisis essentially forced central banks to become more active economic managers, moving from a passive regulatory role to an interventionist approach that continuously adjusts monetary conditions. This approach represents a significant departure from previous monetary policy, where central banks now see themselves as active economic architects rather than passive observers.
BITSTAMP:BTCUSDEducation
by jpkxyz
How to Optimize Your Investments and Navigate Economic SeasonsThe economy operates in recurring phases of expansion and contraction, known as business cycles or economic cycles. These cycles play a fundamental role in shaping economic activity, employment, and investment decisions. In this article, we will explore the different phases of the business cycle, relate them to the seasons of the year, and discuss how investors and businesses can navigate these cycles effectively. 🔵𝚆𝙷𝙰𝚃 𝙸𝚂 𝙰 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴? A business cycle refers to the fluctuation of economic activity over a period, encompassing periods of growth and decline. It is measured through changes in key economic indicators such as GDP (Gross Domestic Product), employment, consumer spending, and industrial production. Business cycles typically follow a regular pattern, starting with a phase of expansion, followed by a peak, a period of contraction or recession, and eventually a trough, after which the economy recovers and the cycle begins anew. 🔵𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙰𝙽𝙳 𝚃𝙷𝙴 𝚂𝙴𝙰𝚂𝙾𝙽𝚂 𝙾𝙵 𝚃𝙷𝙴 𝚈𝙴𝙰𝚁 Each phase of the business cycle can be compared to a season of the year, which provides a helpful way to visualize the economic conditions at play: Spring (Recovery) : After the trough (winter), the economy enters a phase of recovery. Like spring, it's a time of renewal, with growth resuming and businesses beginning to thrive again. Employment rises, consumer confidence improves, and investment increases. Summer (Expansion) : The economy reaches its full strength during the expansion phase. Just like summer brings warmth and energy, this phase brings rising consumer confidence, employment, and production. Companies grow, and investments yield high returns. Autumn (Weakening) : As the cycle peaks, the economy starts showing signs of weakening, much like the cooling of autumn. Consumer spending and business growth slow down, and inflation may rise. The peak signals that the economy is at its maximum potential, and a slowdown or contraction may follow. Winter (Contraction or Recession) : In winter, the economy enters a recession, characterized by declining economic activity, falling production, and rising unemployment. Just as winter halts nature’s growth, a recession slows down economic growth. This is the time when businesses may suffer losses, and consumer confidence weakens. 🔵𝙸𝙼𝙿𝙰𝙲𝚃 𝙾𝙵 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙾𝙽 𝙳𝙸𝙵𝙵𝙴𝚁𝙴𝙽𝚃 𝚂𝙴𝙲𝚃𝙾𝚁𝚂 Business cycles affect various sectors of the economy differently. Some sectors, like consumer discretionary and industrials, tend to perform well during expansions but suffer during recessions. Others, such as utilities and consumer staples, may be more resilient during downturns, as they provide essential goods and services. For example: Technology and Manufacturing : These sectors are highly sensitive to business cycles and tend to flourish during periods of expansion due to increased consumer and business spending. Healthcare and Utilities : These sectors often remain stable during recessions because demand for healthcare and essential services remains constant. Crypto Sector: SP500: 🔵𝙽𝙰𝚅𝙸𝙶𝙰𝚃𝙸𝙽𝙶 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 𝙰𝚂 𝙰𝙽 𝙸𝙽𝚅𝙴𝚂𝚃𝙾𝚁 Investors can use knowledge of the business cycle to adjust their portfolios. During expansion phases, growth stocks and cyclical industries may offer better returns. Risk-On vs. Risk-Off Investing in Different Business Cycle Phases During periods of economic expansion (summer), the environment is often referred to as "risk-on." Investors are more willing to take risks because economic growth drives higher returns on riskier assets, such as equities, growth stocks, or emerging markets. As consumer confidence, business spending, and investments increase, the potential rewards from higher-risk investments become more appealing. Example of risk-on and off of cryptocurrency Example of risk-on and off of Stock Market However, during periods of economic contraction or recession (winter), investors typically shift to a "risk-off" strategy. In this phase, they seek to protect their capital by moving away from high-risk assets and toward lower-risk investments like government bonds, blue-chip stocks, or cash. The focus shifts to preserving wealth, and risk-taking is minimized or eliminated. Investors may use leading and lagging indicators to anticipate where the economy is headed. Leading indicators, such as stock market performance or consumer confidence, tend to signal changes before the economy as a whole moves. Lagging indicators, like unemployment or corporate profits, confirm trends after they occur. 🔵𝙶𝙾𝚅𝙴𝚁𝙽𝙼𝙴𝙽𝚃 𝙿𝙾𝙻𝙸𝙲𝙸𝙴𝚂 𝙰𝙽𝙳 𝙱𝚄𝚂𝙸𝙽𝙴𝚂𝚂 𝙲𝚈𝙲𝙻𝙴𝚂 Governments often intervene to smooth out the extremes of business cycles through fiscal and monetary policy. During recessions, governments may implement stimulus packages, cut taxes, or increase spending to boost demand. Central banks may lower interest rates to encourage borrowing and investment. Conversely, during periods of rapid expansion and inflationary pressure, governments may raise taxes or cut spending, while central banks might increase interest rates to prevent the economy from overheating. 🔵𝙲𝙾𝙽𝙲𝙻𝚄𝚂𝙸𝙾𝙽 Business cycles are a natural part of economic activity, influencing everything from consumer spending to corporate profitability and investment strategies. By understanding the phases of the business cycle (or seasons of the economy) and their impact on various sectors, investors and businesses can better position themselves to navigate economic fluctuations. Whether the economy is expanding or contracting, being aware of the current phase of the business cycle helps guide decisions, manage risks, and seize opportunities.
VANTAGE:SP500Education
by BigBeluga
3
SPX adjusted to M2 money supplyThe value of stock market indices is highly correlated with the amount of existing money. That is why to measure the economic cycles, I weight the value of the stock market with that of the money supply (M2), obtaining this chart. We see how after 2008, business cycles of about 4 years have been established and that, in addition, we are now in an already mature bullish phase. This bullish phase will conclude with the distribution phase mentioned above, with the first resistances at the maximum value of 2007, and the maximum value trend line that continues since 2011 that has recently broken to the upside. It strikes me that we are not better off now than in 2007 or in 2000, despite all the debt created and the amount of money printed along the way. Take into account that Business cycles and the value of Bitcoin are highly correlated
SP:SPX
by edgargargar
1
The Business Cycle is turning up ISM Services PMI Rep: 53.4% ✅ HIGHER THAN EXPECTED ✅ Exp: 51.7% Prev: 50.5% (revised down marginally from 50.6%) The reading for ISM Services PMI came in much higher than expected with services remaining in expansionary territory for Jan 2024 (>50 Level) Whilst ISM Manufacturing PMI came in at 49.1 on the 1st Feb (<50 level) and in contractionary territory, it has made a higher low much like Services PMI. Manufacturing has increased from 46 in July 2023 to 49.1 currently. Services continues to outperform Manufacturing. Both Services and manufacturing appear to be making a series of high lows on the chart which may suggest that this business cycle is starting to turn and curl to the upside. PUKA
ECONOMICS:USNMPMI
by PukaCharts
Business Cycle Rotation Part 6: ConclusionsTo Recap: In parts one and two we used MACD monthly perspective momentum across a large number of tradable assets to produce a matrix of tradable assets, and then to distill an overview of each category's momentum state. The raw data is placed in the quadrant most consistent with the combination of the MACD momentum state and its price trend. The raw data is distilled into 7 categories and placed into the position in the matrix that best describes the majority of the group. Part three illustrated using the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (CLI) for the United States plotted in conjunction with the assets from the matrix to view the economies and position in the business cycle and the markets position in the market cycle. To better visualize the cycles, the data is also placed in stylized business and market cycle diagram. In part 4 we focused on the changes between the end of 2022 and the end of 2023 with a focus on the rates market. After considering the weight of the evidence presented in the first four installments of this series: Business Cycle: Despite the great Q3 2022 GDP print and above trend GDP growth over the 4 quarters ending with September 2023, the business cycle continues to gradually weaken. This can be seen in the chart of the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (CLI) for the United States. Rates: Led this business cycle lower (as one would expect) and it is likely that they will lead the next business cycle higher. Short rates (inverted to place on the same scale as price) may be turning as they have lost their momentum and are threatening to turn higher in price (lower in yield). A confirmed turn would suggest that a recession (probably in excess of the current soft landing narrative) had arrived. It is important to note that since early 2021, short rates have risen significantly more than long rates. This created the type of yield curve inversion that has historically signaled a coming recession. Over the last three months short rates have fallen significantly, flattening the curve back toward un-inverted. I view the initial inversion as a "something odd is happening" warning. What captures my undivided attention is a rapid reversal (back to normal) in which short rates fall more quickly than long rates and the curve moves back into it's normal, positively sloped, configuration. When this happens, a recession is only a few months away. For now, the curve has moved sharply toward normalization, but still hasn't moved above 0 (flat). Equities: I have equities in the "strong decline" quadrant (explanation in part two of the series). While the rally of the last three months does call this view into question, the positioning of rates, the CLI position, and the positions of commodities all tend to support the view. Note that the NYSE Comp is still significantly below its early 2022 cycle high. Importantly, equities are typically strong, often setting new highs, just prior to a recession and that they subsequently trough during or just after a recession. As the recession matures, technical lows in equity charts generally offer important entry points to positional longs. I will repeat again, new highs imply very little about the likelihood of an economic recession. To believe that the US is going to escape a recession, one would need to embrace the soft or no landing thesis. This is not my base case. But, the best argument for that outcome is the M2 money supply regression chart discussed in part 5. The existing stock of money offers a strong argument that this time may be different, or at least delayed. The next best argument is that AI is going to provide immense, immediately available improvements in productivity and immense technological gains. But, I think this is an argument for the business cycle that follows the next recession. Once the recession matures, lower rates will eventually lead to better equities, higher commodities, and an improving business' cycle. As the flight-to-quality runs its course and the economic cycle becomes more normal the DX will begin influencing commodities again. The Dollar and commodities TEND to trend in opposite directions but the Dollars relationship to other asset classes and the cycle is highly variable. Commodities charts remain consistent with a weaker business cycle. The Dollar index remains mired in the center of both a long term trading range and an multi year channel. This period of generally trendless trading may be ending as volatility has broken above a 40 year down trendline, and is finally making a higher low and a higher high. Conclusions: The weight of the evidence (even with the SPX/Tech rally) remains consistent with a weakening business cycle that has yet to enter recession. Rates: The violent decline in short relative to long rates over the last three months is normalizing the curve. Market driven short rates generally lead and the Fed the Fed Funds rate follow. A positive sloped curve (long rates higher than short rates) would strongly suggest that a recession was likely in coming months. Equities: Generally peak prior to a recession before correcting significantly during the recession. Recessions typically provide excellent entry points for equity and risk asset investors. Commodities remain consistent with a weakening business cycle. Man plans, God laughs. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
AMEX:XLI
by CMT_Association
4
Business Cycle Rotation Part 4In the first three installments we described an exercise utilizing the long term momentum in asset classes, the relationship between those classes and the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (CLI) for the United States, in order to anticipate the business cycle and markets. Those posts are linked below. Since October when this series was mostly written, several markets have made promising changes in their momentum states and chart patterns. But, this is a teaching exercise so we will mostly work with the data available at the end of September 2023 and mostly (aside from rates) ignore the dramatic changes of last few weeks. We begin by assessing the change between November 2022 and October 2023. Ideally we should measure at the same point each year. When I was actively managing money this was an exercise I updated in early January so that I could include it in my yearend recap and provide forward guidance to my team. But, given the time perspective involved, slight differences built over a month or two typically make little difference. Interestingly this year may be the exception. I have included a chart of the two and ten year Treasury yields (inverted). Note the three drives to a low pattern in twos, (a sign of waning supply/growing demand), the break of the downtrend (yet to be confirmed by a monthly close above) and the tentative turn into the bullish quadrant. I think of rates as the first mover in the cycle. To believe that the business cycle has turned virtuous I would like to see ten year rates make a solid top and begin to reverse at least some of the technical damage created by the break above the multi decade downtrend and the 3.25% pivot that had defined the bull market structure. I would also like to see a more definitive turn higher in twos. In October rates were oversold in terms of momentum and the structure from the 2020 low was completely intact Until I see solid signs of a monthly perspective yield top in the two year and ten year, it will be difficult for me to label this as the kind of high that would lead a change in the economic cycle. Note that the trendline break in the month of December has turned the shorter term 10 year Treasury (inverted) trend from down to neutral. Commodiites: Commodities have moved from the bull waning to strong decline sector. The weakness in commodities remains consistent with a business cycle that continues to weaken. Dollar: The Dollar remains in bull waning. It has benefited from global flight to quality, carry and the aggresiveness of our central bank verses other central banks. But, of the asset classes, the Dollars relationship to the business cycle is the least consistent. Equities: Domestic equities have been mired in the strong decline sector (in part two we discussed at length why equities were still plotted in this sector). In October we were still categorizing equities as lower due to the lack of a rally in most of the equal weight and broader indexes. That remains the case, but barely, with the equal weight moving slightly above the top of its range. In part 5 we will draw final conclusions and attempt to extrapolate them to 2024. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
TVC:US10Y
by CMT_Association
1
Business Cycle Rotation Part 3Last year I produced several posts that described an exercise that utilizes long term momentum changes between asset classes and the relationship among asset classes to anticipate the business cycle. That series and parts 1 and 2 of this series are linked below. Parts one and two of the series described the general methodology, presented the matrix with the raw data and showed the process used to consolidate the raw data and begin to draw conclusions around the economy's position in the current business cycle. Before I plot the distilled sectors onto a stylized business/market cycle overlay, I plot equities, rates and commodities onto an overlay with the Organization for Economic Co-operation and Development (OECD) Composite Leading Indicator (CLI) for the United States. CLI readings above 100 (dashed red line) suggest economic expansion to come while below the 100 line suggests weakness, and perhaps recession to come. The index is currently below 100 but rising toward the 100 line. So still weakening but at a much slower pace. To help visualize the cycle I plot 10 year rates (inverted), SPX and the Thompson Core CRB index along with the CLI. Viewed in the manner the cycle that began with the bond top appears to be consistent in terms of sequencing. Rates topped, economy (CLI) topped, followed by equities and finally commodities top as the CLI enters the economic contraction phase. Fast forward to todays configuration. In this perspective, despite the sharp rally in early November, while there is room for a cyclic rally, there is no sign of a lasting bond bottom (see next chart). Commodities, while off their lows don't appear to be suggesting a new leg up in the cycle (but may be moving that way). I think of rates as the first mover in the cycle. To believe that the cycle has turned virtuous I like to see ten year rates make a solid top. The ten year note monthly chart has broken above the multi decade downtrend and above the 3.25% pivot. While a bit overbought in terms of momentum and a small RSI divergence is showing up, the structure from the 2020 low is completely intact. Until I see solid signs of a monthly perspective yield top in the two year and ten year, it will be difficult for me to label this as the kind of high that would lead a change in the economic cycle. The distilled sectors are placed onto stylized market and economic cycle sine curves. If markets (dark blue curve) are correctly anticipating the business cycle (grey curve) the business cycle is somewhere past peak, and should be expected to steadily deteriorate over coming quarters. In part 5 we will examine the totality of the evidence and draw conclusions around the current cycle and what it implies for 2024. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
FRED:USALOLITONOSTSAM
by CMT_Association
9
Visualizing Business and Market Cycles Through Market Momentum 2Last year I produced several posts that described an exercise that utilizes long term momentum changes between asset classes and the relationship among asset classes to anticipate the business cycle. That series and part 1 of this series are linked below. Methodology: Individual markets and ratios are plotted in the quadrant that best describes their combination of momentum and price trend. The precise point where the individual plots fall in the matrix is not nearly as important as the overall pattern of multiple plot points and the weight of the evidence. The quadrants reflect the relationship between the 13 and 26 month exponentially smoothed averages. Part one of the series described the general methodology and presented the matrix with the raw data. In this piece we consolidate the individual data points and begin to draw conclusions around the economy's position in the current business cycle. This is the raw data plot. Its important to remember that each asset placement in the matrix is determined by the combination of momentum state and price behavior. In other words there is a strong subjective aspect in the placement that is subject to all the normal behavioral biases. I have no doubt that the matrix would look somewhat different had someone else produced it. In my opinion the more important takeaway is not where any individual asset falls within the matrix but where the general pattern produced by like assets falls within the matrix. My placement of the equities within the matrix offers a good example. I generally have the equities in the lower right quadrant (strong decline/bear market). This despite SPY MACD momentum having moved into the MACD advancing quadrant. I have left it in the bear market quadrant because, A) Price is still significantly below last years high. B) The equal weight SPY and NYSE composite have not displayed similar strength. C) My read of macro conditions is still bearish (this is where behavioral bias can really make a difference in where the assets are placed). Point being, the work is a combination of quantitative and qualitative and clearly has a subjective aspect. After placing the individual assets in the matrix I then distill them into 7 categories and place them into the position in the matrix that best describes that group. Remember that individual auctions, sectors, etc. may be in far different positions than the bulk of the category but the distillation is a weight of the evidence process meant to identify the approximate position of the bulk of similar auctions. More detailed distillations can separate industrial and agricultural commodities, and add bond market credit spreads, hyper cyclical and financial companies. For comparison, I have included the distilled matrix from 2022: In the next installment we will describe how the sectors interact over the course of a typical business cycle, plot the information onto a stylized business cycle and draw conclusions about the current cycle. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur
AMEX:XLI
by CMT_Association
2
Investors' Holy Grail - The Business/Economic CycleThe business cycle describes how the economy expands and contracts over time. It is an upward and downward movement of the gross domestic product along with its long-term growth rate. The business cycle consists o f 6 phases/stages : 1. Expansion 2. Peak 3. Recession 4. Depression 5. Trough 6. Recovery 1) Expansion : Sectors Affected: Technology, Consumer discretion Expansion is the first stage of the business cycle. The economy moves slowly upward, and the cycle begins. The government strengthens the economy: Lowering taxes Boost in spending. - When the growth slows, the central bank reduces rates to encourage businesses to borrow. - As the economy expands, economic indicators are likely to show positive signals, such as employment, income, wages, profits, demand, and supply. - A rise in employment increases consumer confidence increasing activity in the housing markets, and growth turns positive. A high level of demand and insufficient supply lead to an increase in the price of production. Investors take a loan with high rates to fill the demand pressure. This process continues until the economy becomes favorable for expansion. 2) Peak : Sector Affected : Financial, energy, materials - The second stage of the business cycle is the peak which shows the maximum growth of the economy. Identifying the end point of an expansion is the most complex task because it can last for serval years. - This phase shows a reduction in unemployment rates. The market continues its positive outlook. During expansion, the central bank looks for signs of building price pressures, and increased rates can contribute to this peak. The central bank also tries to protect the economy against inflation in this stage. - Since employment rates, income, wages, profits, demand & supply are already high, there is no further increase. - The investor will produce more and more to fill the demand pressure. Thus, the investment and product will become expensive. At this time point, the investor will not get a return due to inflation. Prices are way higher for buyers to buy. From this situation, a recession takes place. The economy reverses from this stage. 3) Recession : Sector Affected : Utilities, healthcare, consumer staples - Two consecutive quarters of back-to-back declines in gross domestic product constitute a recession. - The recession is followed by a peak phase. In this phase economic indicators start melting down. The demand for the goods decreased due to expensive prices. Supply will keep increasing, and on the other hand, demand will begin to decline. That causes an "excess of supply" and will lead to falling in prices. 4) Depression : - In more prolonged downturns, the economy enters into a depression phase. The period of malaise is called depression. Depression doesn't happen often, but when they do, there seems to be no amount of policy stimulus that can lift consumers and businesses out of their slumps. When The economy is declining and falling below steady growth, this stage is called depression. - Consumers don't borrow or spend because they are pessimistic about the economic outlook. As the central bank cuts interest rates, loans become cheap, but businesses fail to take advantage of loans because they can't see a clear picture of when demand will start picking up. There will be less demand for loans. The business ends up sitting on inventories & pare back production, which they already produced. - Companies lay off more and more employees, and the unemployment rate soars and confidence flatters. 5) Trough : - When economic growth becomes negative, the outlook looks hopeless. Further decline in demand and supply of goods and services will lead to more fall in prices. - It shows the maximum negative situation as the economy reached its lowest point. All economic indicators will be worse. Ex. The highest rate of unemployment, and No demand for goods and services(lowest), etc. After the completion, good time starts with the recovery phase. 6) Recovery : Affected sectors: Industrials, materials, real estate - As a result of low prices, the economy begins to rebound from a negative growth rate, and demand and production are both starting to increase. - Companies stop shedding employees and start finding to meet the current level of demand. As a result, they are compelled to hire. As the months pass, the economy is once in expansion. - The business cycle is important because investors attempt to concentrate their investments on those that are expected to do well at a certain time of the cycle. - Government and the central bank also take action to establish a healthy economy. The government will increase expenditure and also take steps to increase production. After the recovery phases, the economy again enters the expansion phase. Safe heaven/Defensive Stocks - It maintains or anticipates its values over the crisis, then does well. We can even expect good returns in these asset classes. Ex. utilities, health care, consumer staples, etc. ("WE WILL DISCUSS MORE IN OUR UPCOMING ARTICLE DUE TO ARTICLE LENGTH.") It's a depression condition for me that I couldn't complete my discussion after spending many days in writing this article. However, I will upload the second part of this article that will help investors and traders in real life. This article took me a long time to write. I'm not expecting likes or followers, but I hope you will read it. @Money_Dictators
NASDAQ:AAPLEducation
by Money_Dictators
64
Visualizing Business and Market Cycles Through Market MomentumLast year I produced several posts that described a methodology utilizing long term momentum changes between asset classes and the relationship among asset classes to help anticipate the business cycle. That series is linked below. When I worked in the institutional setting I would place hundreds of assets, ratios, spreads of individual corporate bonds and equities into a 4 quadrant MACD momentum matrix. I would then condense the raw data into thematic groups and see what the matrix implied about the business cycle. As an individual investor with limited time and fewer resources, I generally plot 80 assets and spreads and find that sufficient to extract a view. For most of the last two decades the liquidity regime provided by monetary and fiscal policy disrupted the economies natural cycle. But, I believe that policy inflections have occurred and that asset prices will again become more connected to the real economy and less connected to policy. Analysis such as this will again become more useful. Methodology: Individual markets and ratios are plotted in the quadrant that best describes their combination of momentum and price action. The precise point where the individual plots fall in the matrix is not nearly as important as the overall pattern of multiple plot points and the general weight of the evidence. It is important to realize that the momentum state is not always obvious. Accept that its messy and use your best judgement in deciding on quadrants. The idea is to build a general view of the market and economic cycle. What defines the momentum quadrant? The monthly perspective moving average convergence divergence oscillator (MACD). The individual quadrants reflect the relationship between the 13 and 26 month exponentially smoothed averages. Quadrant One: Waning Bear: In this quadrant momentum is bearish with the shorter average below the longer average, but the difference between the two is becoming less. Momentum is still lower, but at a decreasing rate. Quadrant Two: Strong Advance: In this quadrant momentum is bullish with the shorter average above the longer average and the difference between the two is becoming greater. Momentum is higher at an increasing rate. Quadrant Three: Waning Bull: In this quadrant momentum is bullish with the shorter average above the longer average, but the difference between the two is becoming less. Momentum is still higher, but at a decreasing rate. Quadrant Four: Strong Decline: In this quadrant momentum is bearish with the shorter average below the longer average and the difference between the two is becoming greater. Momentum is lower at an increasing rate. Trading Range: A market in a trading range is removed from the matrix until it breaks from the range even if MACD momentum has been falling/rising for months. Over the next few posts, we will briefly address the construction of the matrix, and attempt to draw conclusions around the market and economic cycles. If you are interested in the methodology, please visit the links below for in depth discussion. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
AMEX:XLI
by CMT_Association
2
Dark Pool Buy Zone Signals: AEISNASDAQ:AEIS was one of the darlings of the '90s. So much fun to swing trade this stock. It is now moving up to test the all-time highs of 2021. Electronic Components are cyclical stocks typically with huge revenues ahead of holidays, school openings and summertime. The cycle is starting again. Notice that Volume Oscillators and Money Flow indicators are rising from the bottom of the chart. This pattern has been very reliable in determining the end of the run down this year. Many stocks have this pattern at the moment. This signals the Buy Zone.
NASDAQ:AEISLong
by MarthaStokesCMT-TechniTrader
Inflation and Business Cycle: What will happen next?Inflation has been rising aggressively since 2021. It accelerated from 2% to hit an all-time high of 9.1% in June 2022. As inflation rose, central banks like the Fed raised interest rates to control inflation . But this effort to control inflation, on one hand made money more expensive for the industries and on the other hand pushed consumers to reduce their spendings. Many economists had already predicted rising inflation and its impeding worst impact on the global economy and stock markets. Still, there are fears everywhere that bear markets could persist and even a further decline is likely. Here the basic question arises that must be understood: WHAT IS INFLATION & WHY DOES IT OCCUR? In fact, inflation occurs whenever demand for goods and services increases while supply remains constrained. Growth is everyone's dream... To capitalize on this aspiration, banks provide cash at low interest rates to support growth, but unfortunately this cash is used by people to buy luxuries like cars, electronics and homes. Cars need fuel and metals, electronics need high R&D spending and skilled human capital, and houses need building materials. Pressure on luxury items leads to price increases. Technically speaking, when demand accelerates faster than supply, it has a net effect on price. This phenomenon is referred to as the law of demand, which states: "If more people want to buy something, when there is limited supply, the price of that thing will be higher." (The same law of demand applies in the stock market: as demand for stocks increases, their price increases.) After Covid-19, global demand for goods and services began to normalize (increase). But to boost growth, which had been severely hampered in Covid times, banks made easy loans available at attractive interest rates. The resulting increase in the supply of money in the markets stimulated consumer spending. Ideally, if growth had been at a sustained pace and in the productive sectors, inflation would not have occurred. But that never happens - a phenomenon that creates the business cycle. A business cycle has phases of expansion and contraction. We are currently in the contraction phase of the business cycle - inflation is still high, interest rates and yields are unbearable, and industrial performance has declined. WHAT WOULD HAPPEN NEXT? - Unbearable prices will force consumers to reduce their spending/demand - High interest rates and reduced demand will reduce industry revenues and profits - Equity markets will continue to show poor performance But good times will come again! When the market bottoms out in the business cycle, expansion begins. This will be an ideal time to invest in growth and value stocks.
ECONOMICS:USIRYY
by starringinvestors
Visualizing Business and Market Cycles Through Market Momentum 3In parts 1 and 2 we discussed using a market momentum matrix to anticipate the business cycle and how the MACD oscillator is used to build the matrix. In part 3 we will illustrate the logic of placing individual auctions into their quadrants, and illustrate the distillation process. As a reminder Individual markets and ratios are plotted in the quadrant (quad) that best describes their combination of momentum and price action. It is important to understand that the proper quad is not always obvious. Accept that its messy and use your best judgement deciding on placement. The idea is to build a general view of the market and economic cycle not to become overly mired in detail. Recycling: It is not unusual for auctions to become overbought or oversold, lose momentum, move into a neighboring quadrant for a few months and then cycle back. When this happens, use your judgment as to which quad to place the auction in. MACD difference bars are color coded to reflect the momentum state. Light Green = Quad 1 (Waning Bull) Dark Green = Quad 2 (Strong Advance) Light Red = Quad 3 (Waning Bear) Dark Red = Quad 4, (Strong Decline) The position in the trend is described by its quadrant (WB, SA, WB or SD) and the position in the quadrant by the number of months spent in the quadrant. For instance, WB7 describes a market that has been in the WB quadrant for seven months while SA12 would describe a market that has been in the SA quadrant for 12 months. SPX Monthly: A pure momentum reading would put SPX in quad 1 (note the light pink MACD difference bars), but the change in momentum state has not been confirmed by price behavior and the bear is relatively young. I would continue to place this auction into Quad 4 (strong decline) and count the number of months inside the Quad as 10. In my spreadsheet I designate it as SD10. Gold Monthly: In momentum terms this market should register in the very lowest portion of Quad 4 and deeply oversold, but nearly three years of mostly lateral price behavior leaves it trendless. I remove rangebound auctions from the matrix until they definitively break out. FXI (China Large Cap ETF) Monthly: Price behaviors remain clearly bearish so I continue to place the auction in Quad 4. But after 17 months in Quad 4 (SD17) it wouldn't take much to convince me to move the auction to Quad 1 (Waning Bear). 5 Year Treasury Note Futures: After 23 months spent in Quad 4 (SD14) it wouldn't take much in terms of price action to convince me to move the auction to Quad 1. Bitcoin: Pure momentum suggests that the market has moved from Quad 3 to Quad 1, but the complete failure of price to confirm the momentum compels keeping it in Quad 3 (SD12). This is the matrix with individual auctions plotted (plotted in mid-November). In order to better visualize the patterns, I color code by auction types. Clusters associated with equities (black and red) are clustered in the midpoint of quadrant 4, Rates inverted, (blue) rest in the depths of quadrant 4. Commodities (purple) are clustered in the bottom of quadrant 3 and the very top of quadrant 4. It also appears that international equities (gold) are moving into the lower portion of quadrant 4. The colored clusters can be distilled into more general categories. Remember that individual auctions, sectors, etc. may be in far different positions than the bulk of the category but the distillation is a weight of the evidence process meant to identify the approximate position of the bulk of similar auctions. More detailed distillations can separate industrial and agricultural commodities, and add bond market credit spreads, hyper cyclical and financial companies. In installment 4 we will describe how the sectors interact over the course of a typical business cycle, plot the information onto a stylized business cycle and draw conclusions about the current cycle. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
SP:SPX
by CMT_Association
21
Visualizing Business and Market Cycles Through Momentum: 2In part one, we discussed using a market momentum matrix to anticipate the business cycle, the potential inflection in the macro environment and shared the final distillation of the current momentum matrix. In part 2 we discuss how the MACD oscillator is used to build the matrix. Methodology: Individual markets and ratios are plotted in the quadrant that best describes their combination of momentum and price action. The precise point where the individual plots fall in the matrix is not nearly as important as the overall pattern of multiple plot points and the general weight of the evidence. It is important to realize that the momentum state is not always obvious. Accept that its messy and use your best judgement in deciding on quadrants. The idea is build a general view of the market and economic cycle. What defines the momentum quadrant? The monthly perspective moving average convergence divergence oscillator (MACD). The individual quadrants reflect the relationship between the 13 and 26 month exponentially smoothed averages. Quadrant One: Waning Bear: In this quadrant momentum is bearish with the shorter average below the longer average, but the difference between the two is becoming less. Momentum is still lower, but at a decreasing rate. Quadrant Two: Strong Advance: In this quadrant momentum is bullish with the shorter average above the longer average and the difference between the two is becoming greater. Momentum is higher at an increasing rate. Quadrant Three: Waning Bull: In this quadrant momentum is bullish with the shorter average above the longer average, but the difference between the two is becoming less. Momentum is still higher, but at a decreasing rate. Quadrant Four: Strong Decline: In this quadrant momentum is bearish with the shorter average below the longer average and the difference between the two is becoming greater. Momentum is lower at an increasing rate. Trading Ranges: A market in a trading range is removed from the matrix until it breaks from the range even if MACD momentum has been falling/rising for months. Recycling: It is not unusual for auctions to become overbought or oversold, lose momentum, move into a neighboring quadrant for a few months and then cycle back. When this happens, use your judgment as to which quadrant to place the auction in. This pattern most typically occurs in an market that has reached a momentum extreme in the perspective of one lower degree and typically appears only once. I think this is currently happening in equities. Bearish momentum is waning as weekly momentum became deeply oversold, but monthly price charts, in my estimation, don't support a change in trend. In part 3 we will place individual auctions into the matrix and begin to outline market relationships to the business cycle. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
SP:SPGSCI
by CMT_Association
26
Visualizing Business/Market Cycles Through Market Momentum: 1Visualizing Business and Market Cycles Through Market Momentum: Part 1 Effect of liquidity: Change in regime: It is often said that markets are discounting mechanisms, anticipating changes in the business cycle. I believe that it is generally true, and while it has been less true for most of the last two decades, that it is about to become true again. It is my view that the bull markets of the last fifteen years were largely an artifact of the flood of liquidity that followed the 2008 financial crisis. The deflationary forces created by globalization and technology enabled continued central bank activism and allowed fiscal authorities to run massive deficits without readily apparent repercussions. The combination of low inflation and immense liquidity effectively changed the nature of the markets. The willingness of monetary authorities to support asset prices rendered the business cycle benign and economic signals generated by the markets less useful. Bullish trends became longer and more entrenched, dips better supported, overbought conditions persisted longer while oversold conditions were fleeting. Counterproductive trading and investing behaviors and bad analysis were continuously bailed out by policy. I believe that a policy inflection has occurred. Central banks and fiscal authorities will become more and more constrained as inflation becomes a greater risk than deflation. Asset prices will again become more connected to the real economy and less connected to policy. Effective analysts recognize that changes in a fundamental regime can damage (or enhance) the effectiveness of a favored techncial approach. This series is going to focus on a technique that became less effective as asset prices were driven uniformly higher but that is now likely to become informative again. When I worked in the institutional setting I would place hundreds of assets, ratios, spreads of individual corporate bonds and equities into a 4 quadrant MACD momentum matrix. I would then condense the raw data into thematic groups and see what the matrix implied about the business cycle. In that setting I had help and systems to accomplish this. But, most of the value can be extracted by following thirty or so auctions and ratios. While there is no end to the number of permutations that can be utilized inside the matrix, most of the value can be extracted in a few hours at quarter end. The illustration is the distilled matrix info. In part 2 I will cover how the matrix is constructed and in subsequent installments how the information can used to help inform a macro viewpoint and investment process. And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum. Good Trading: Stewart Taylor, CMT Chartered Market Technician Taylor Financial Communications Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
AMEX:XLI
by CMT_Association
24
ETH/USDT - considerable entry points into the long term positionHello, traders! ETH price has significantly corrected after going into a trend. The business cycle is nearing its end, which is confirmed by the weakness of the instrument. The price is under MA100 and MA200 on the daily timeframe. Also, the RSI indicator value is constantly decreasing and gradually approaching the oversold level. The range of $1050 - $1440 from which the asset went into the trend within the current year is interesting for mid-and long term purchases. The position should be obtained in portions, for example, the first part can be obtained near the level of $1440, and the second and the third near the levels of $1275 and $1050 correspondingly. The targets for such purchases will be levels of $2300 $2488 $3200 $3590 $4180 The stop loss should be calculated depending on the amount of money involved in the trade. For compliance with risk management, it is advisable not to exceed the limit of 10-20% of the deposit for one transaction. Good luck and watch out for the market P.S. This is an educational analysis that shall not be considered financial advice
COINBASE:ETHUSDLong
by UnknownUnicorn10064030
Synchronized marketsSo we have synchronized movements between long-term treasury yields (5, 10 and 30 years) and cyclicals (airlines, oil companies, carmakers, cruise lines, etc.) regardless of the fundamentals. If these yields are expected to continue increasing in response to a higher rate of inflation, a continuation of the trend in cyclicals would also be expected. The peak of June 8 of last year was the clearest proof of this interrelation between markets. Oil prices could continue to rise, I would not be surprised if it reaches $ 100 a barrel.
FRED:DGS10
by amateur_trad3r
Bitcoin Historic cycle and the Bitcoin Business CycleHere is a few ideas in one chart, a parabolic curve that is inside the channel bitcoin has been following year after year. Looking at the 4 year halving(halvening) cycle leading to a parabolic run up in price. On this chart we see both previous cycles from previous halving events overlayed to give a few ideas what could happen if history were to rhym again. Bitcoin Business Cycle 0.0 cycles]: 2009-01-03 19:15:05 0.25 cycles]: 2011-02-28 04:48:26 Minor $1-$30 0.5 cycles]: 2013-04-23 15:21:47 Sig bubble to 266 0.75 cycles]: 2015-06-18 00:55:08 Minor bottom 1.0 cycles]: 2017-08-11 10:28:30 Major segwit bullrun 1.25 cycles]: 2019-10-05 20:01:51 Minor Repo Market meltdown? 1.5 cycles]: 2021-11-29 04:35:12 Sig 1.75 cycles]: 2024-01-23 14:08:34 Minor 2.0 cycles]: 2026-03-18 23:41:55 Major more on business and economic cycles see martin armstrongs work www.armstrongeconomics.com
BITSTAMP:BTCUSDLong
by ju5tin
Is XLU underperformance signaling a potential crash ahead? Business cycle is still going down (as indicated by falling steel prices) and defensive sectors are supposed to outperform SPY in this environment. Lately XLU is underperforming SPY significantly, which happened twice in last several years. In 2015 it foretold a big market crash. In early 2019, while the divergence was relatively small, it predicted the May correction. This time there is a significant divergence. I expect a significant decline in stocks in coming weeks.
HShort
by quixilver
1