No bottom in the stock market with no bottom in the bond

Last Updated on 5 January 2023 by

My Dashboard on Tradingview where I am monitoring the entire bond market in the world with my magma indicator

When investing for the long term I first look the bond market before leaping in the stocks.

Few simple and important rules are to follow in this market.

  1. Higher Bond yields = Lower Bond Prices = Bottom in the bond market is more bottom
  2. Short-term and mid-term bond yields are closing to long-term yields (example 2-Year yield = 10-Year yield) = this means flattening = not good for long-term investment. Stay alerting for your paper profits.
  3. Short-term and mid-term bond yields are greater than long-term yields (example 2-Year yield is greater than 10-Year yield) = this means inversion = NOT GOOD, imminent fear of recession. Remember: stock market does not perform well during recessions.
  4. Short-term and mid-term bond yields are less than long-term yields (example 2-Year yield is less than 10-Year yield and going lower) = this means steepening. That’s fine, economics sounds good for long-term investments.

Looking at the figure above: United States, Canada, Brazil are countries with the most prolongated inversions in the bond yields (highlighted with red circles).

Last but not least rule.

5. More prolongated inversion = not good, even more.

Flattening areas (yellow circles) have to be carefully monitored.

Good perspective (green circles) when looking for Japan long-term and mid-term yield curves are steepening. Same as in Australia.

Giancarlo Pagliaroli

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 me.

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