Hello everyone. I kept a close eye on the job data as it is the major indicator that tells how soon Fed may hike the interest rate.
Last Friday's better-than-expected job report pushed US 10Y yield up by more than 6%, weighting on Gold price. Today's jobless claim was in line with the strong job report. It fell for a third straight week. The number of insured unemployment claims, a measure of continuing jobless claims, fell to 2.866 million for the last week of July. That is the lowest level since mid-March 2020. A strong sign of continuation of economic recovery.
I expected stock market to go down a bit, but it seems market has already priced in the news, with NQ and S&P moved between loss and gains. I post the three underlying line chart again as below, to visualize the relationship among NQ, Gold and US 10Y yield. It looks NQ is less sensitive to the treasury yield than gold from late July. Nasdaq basically has been flatten(choppy) for some time, lacking clear guidance about where to go.
The next big level for the yield is 1.41%. If it is firmly conquered, the yield is back to its new range again. With huge possibilities of testing the 2% pre-pandemic level, stock market will then be under pressure. But don't be panic, things might go like this based on what happened last time back in 2014.
1. The Fed will be very specific about its intentions around tapering its QE program in advance to minimize the impact on the markets. The current buying amount is 120B per month.
2. Tapering is likely to be very gradual. In 2014 when Fed tapered for the first time, it reduced the monthly purchases by $5 billion per month for Treasuries and MBS each. The full tapering process took 10 months to complete.
3. Tapering does not mean the treasury yield will go higher. Please refer to the chart below. From Dec. 2013 to end of 2014, you can see the US 10Y yield actually went down with the tapering. Gold was down whilst Nasdaq was up in a steady move.
So, don't overreact to tapering. Things might be different this time as we've been through this before. Hopefully, what I shared here can inspire you to do your own research and develop your view about what will happen. There are always two voices, bullish and bearish. What do you think?
Give me a like you think it's useful.
Last Friday's better-than-expected job report pushed US 10Y yield up by more than 6%, weighting on Gold price. Today's jobless claim was in line with the strong job report. It fell for a third straight week. The number of insured unemployment claims, a measure of continuing jobless claims, fell to 2.866 million for the last week of July. That is the lowest level since mid-March 2020. A strong sign of continuation of economic recovery.
I expected stock market to go down a bit, but it seems market has already priced in the news, with NQ and S&P moved between loss and gains. I post the three underlying line chart again as below, to visualize the relationship among NQ, Gold and US 10Y yield. It looks NQ is less sensitive to the treasury yield than gold from late July. Nasdaq basically has been flatten(choppy) for some time, lacking clear guidance about where to go.
The next big level for the yield is 1.41%. If it is firmly conquered, the yield is back to its new range again. With huge possibilities of testing the 2% pre-pandemic level, stock market will then be under pressure. But don't be panic, things might go like this based on what happened last time back in 2014.
1. The Fed will be very specific about its intentions around tapering its QE program in advance to minimize the impact on the markets. The current buying amount is 120B per month.
2. Tapering is likely to be very gradual. In 2014 when Fed tapered for the first time, it reduced the monthly purchases by $5 billion per month for Treasuries and MBS each. The full tapering process took 10 months to complete.
3. Tapering does not mean the treasury yield will go higher. Please refer to the chart below. From Dec. 2013 to end of 2014, you can see the US 10Y yield actually went down with the tapering. Gold was down whilst Nasdaq was up in a steady move.
So, don't overreact to tapering. Things might be different this time as we've been through this before. Hopefully, what I shared here can inspire you to do your own research and develop your view about what will happen. There are always two voices, bullish and bearish. What do you think?
Give me a like you think it's useful.
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plan your trade and trade your plan
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.