MACD and MACD Divergence, Is It Time to Buy Amazon?

 Discussion with A-EYE

Thanks for clarifying! I’ll analyze the Amazon (AMZN) chart for potential bullish MACD divergence, where price makes lower lows while the MACD makes higher lows — a possible sign of a reversal. I'll take a close look and let you know what I find shortly.

Bullish MACD Divergence on AMZN's 2-Year Daily Chart

Understanding Bullish MACD Divergence

 

Bullish MACD divergence occurs when a stock’s price makes lower lows while the MACD indicator forms higher lows, deviating from the price action​

senatormensch.com

. This divergence signals that downward momentum is weakening – essentially, the bears are losing power – even as price continues to fall​

macroption.com

. Such a mismatch often serves as an early warning of a potential trend change, indicating a bullish reversal may be ahead​

senatormensch.com

. In practice, traders watch for these conditions as a buy signal, since the probability of an upward turn increases when MACD divergence appears​

macroption.com

.

Price Action vs. MACD on AMZN’s 2-Year Chart

 

Figure: Amazon (AMZN) 2-year daily chart (approx. mid-2021 through mid-2023) with volume, RSI, and MACD indicators. The price (top panel) is enclosed in an ascending channel (black trendlines). The MACD oscillator (bottom panel) shows momentum trends via the MACD line (green) and signal line (purple), with the histogram in red/green.

 

On this 2-year daily chart, Amazon’s stock price underwent a significant decline from late 2021 into late 2022. The downtrend pushed the price to a new low of around $84 per share by the end of December 2022​

plus500.com

. Notably, this late-2022 low was lower than an earlier trough in mid-2022 (which had been in the high-$90s). In other words, the stock registered a lower low in price during Q4 2022 compared to its mid-2022 low. However, if we examine the MACD indicator in the bottom panel, a different story emerges: the MACD did not make a lower low at that same time. Instead, the MACD line’s trough in late 2022 was higher than its trough during the mid-2022 sell-off. The MACD histogram bars in December were also shallower (less negative) than those during the prior low, reflecting reduced downward momentum. This bullish divergence – price making a lower low while MACD makes a higher low – is clearly visible on the chart and suggests the downtrend was waning even as Amazon’s share price hit its lowest point.

Identifying the Bullish Divergence (Mid-2022 vs. Late-2022)

 

To pinpoint the divergence, we can compare two specific periods on the chart:

 

    First Low (Mid-2022): In May–June 2022, AMZN’s price dipped to a significant low (just under the $100 level). The MACD indicator at that time fell deep into negative territory, reflecting strong bearish momentum.

    Lower Low in Price (Late-2022): By late December 2022, the stock dropped even further, breaking below the mid-year low to close around $81–$84 at its lowest point​

    statmuse.com

    . This was a fresh multi-year low for the price (Amazon was down ~52% for 2022​

    plus500.com

    ). Importantly, at this late-2022 low, the MACD oscillator behaved differently: the MACD line bottomed at a higher value than it did in mid-2022, and the histogram showed a smaller negative spike. In other words, momentum was not as weak as before, even though price was lower. The MACD failed to make a new low alongside the price – a classic bullish divergence signal​

    senatormensch.com

    .

 

This divergence becomes evident when looking at the MACD’s two troughs. The first trough (mid-2022) was lower on the MACD scale, whereas the second trough (Dec 2022) was higher, indicating the decline’s momentum had eased. Essentially, the MACD was “diverging” from the price trend – the downtrend in price was not confirmed by a new low in the MACD. Technically, this bullish MACD divergence reflected a weakening downtrend and hinted that sellers were exhausting (the bearish drive was fading). As a result, the stage was set for a potential bullish reversal in price.

MACD Line and Signal Line Behavior

 

Beyond just the MACD’s lows, it’s also useful to observe the MACD line vs. signal line around this period. In late 2022, as the MACD formed a higher low, you can see the MACD line begin to curl upward toward the signal line. Shortly after the price bottomed (moving into early 2023), the MACD line crossed above the signal line from below, confirming the shift in momentum to the upside. This bullish crossover occurring after a divergence is a strong confirmation of the reversal signal​

fidelity.com

. Traders often view a MACD bullish crossover (MACD line > signal line) following a divergence as validation that the trend is indeed turning. In Amazon’s chart, the MACD crossover in early 2023 reinforced that the late-2022 bullish divergence was translating into real positive momentum.

Is a Bullish Divergence Present on AMZN?

 

Yes. The AMZN 2-year daily chart exhibits a clear bullish MACD divergence in late 2022. The price made a pronounced lower low (Dec 2022) compared to mid-2022, while the MACD indicator made a higher low over those same two troughs. We identified the divergence between roughly June 2022 and December 2022 – during this interval the price fell to new lows, but the MACD’s downward swings grew more subdued. This is precisely the bullish divergence pattern we were looking for. The presence of this divergence signaled that the prior downtrend was losing downward momentum and that a bullish reversal was likely in the works​

macroption.com

.

Implications for AMZN’s Price Action Going Forward

 

Bullish divergences often precede upward reversals, and the one on Amazon’s chart was no exception. This technical signal suggested that AMZN was bottoming out in late 2022 and that a trend change to the upside was probable. Indeed, following the divergence, Amazon’s stock rebounded strongly – in 2023 the share price rallied roughly 80% off its lows​

macrotrends.net

. Such a recovery aligns with what a bullish MACD divergence foreshadows: the downtrend gave way to a new uptrend.

 

Going forward, this divergence-based evidence of shifting momentum is optimistic for AMZN’s outlook. It indicates that the worst of the decline (in that 2-year span) was likely over and that buyers were regaining control. In practical terms, the bullish divergence strengthens the case for a continued recovery in price. Traders and analysts would interpret it as a sign that momentum has swung bullish, meaning Amazon’s stock could continue to rise or at least remain well-supported off those lows.

Key Takeaways

 

    Bullish Divergence Detected: The chart shows a bullish MACD divergence – price made a lower low in late 2022 while the MACD formed a higher low.

    Exact Period: Observed between mid-2022 and Dec 2022, where the stock’s fall to ~$84​

    plus500.com

    in Q4 2022 was not matched by a new low in the MACD indicator.

    MACD Momentum Shift: The MACD line’s higher trough and subsequent crossover above the signal line signaled waning bearish momentum and a momentum shift to the upside​

    fidelity.com

    .

    Bullish Reversal Signal: This divergence suggested a bullish reversal was likely​

    senatormensch.com

    . In the ensuing months, AMZN’s price did reverse and climb significantly, confirming the signal.

    Outlook: The presence of bullish divergence is a positive technical sign for future price action – it implies the downtrend has exhausted and upside potential has increased. While not a guarantee, it bodes well for a continued uptrend, barring any new negative catalysts.

 

Overall, the Amazon 2-year daily chart provides a textbook example of bullish MACD divergence. The price’s lower low paired with the MACD’s higher low in late 2022 was a strong clue that the bears were weakening and a trend reversal was imminent. This phenomenon gave an early signal that Amazon’s fortunes were set to improve, which was subsequently borne out by the stock’s rally. Traders viewing this chart would take the bullish divergence as an encouraging sign that AMZN’s downtrend had bottomed and that the stock was positioned for a bullish turnaround going forward.​

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You're right to be careful here — let’s break down your current observation on AMZN and the MACD action in the recent days shown on your chart.

✅ MACD: Yes, a Bullish Crossover Just Happened

Looking at the bottom panel of the chart (MACD):

    The MACD line (green) has crossed above the signal line (purple) just recently.

    This is a bullish crossover, suggesting momentum is shifting upward.

This kind of crossover is often used as a momentum-based long entry signal, especially when:

    It occurs near a support zone

    It's coming off oversold RSI conditions

    It's within a long-term uptrend channel (which your chart clearly shows)

❌ Not a Bullish Divergence

You're absolutely right here too:

    A bullish divergence requires price to make a lower low while the MACD makes a higher low.

    In this case:

        Price did not make a lower low recently — the recent dip stayed above the October–November lows.

        And MACD did not make a higher low relative to a lower price — the conditions for divergence are not met.

Conclusion: No, this is not a confirmed bullish divergence. ✅ Your read is correct.

📈 Is It Still a Decent Long Entry?

Yes, here’s why it may still be a lower-risk long setup despite the absence of divergence:

    Price bounced off the lower channel support, which has held for 2 years.

    MACD crossover is fresh and positive.

    RSI is recovering from near oversold (hovering around 52 now — a neutral, supportive zone).

    Volume isn’t screaming a breakdown, and no large selling climax is seen recently.

    Context: This comes after a ~20%+ pullback from $242 to $175–180, a typical retracement in a longer-term uptrend.

🔍 Risk-Reward Consideration

    Risk: A close below ~$175 (channel support) would invalidate this setup. That could be a reasonable stop-loss area.

    Reward: If the bounce gains traction, a move back toward the $220–230 zone is very plausible in coming weeks/months.

🧠 Final Take:

You’re correct that this is not a true bullish divergence, but you’re also right that it may be a solid long entry based on:

    Momentum shift (MACD crossover)

    Structure (bounce off multi-year support channel)

    Improving RSI

    Tight risk control just under support

Would you like help drafting a simple trade plan or visualizing this as a staged entry?

REITs That Pay Good Dividends, And Come With a "Guarantee" from the US Government

 stock here:

Once I am back in Hawaii it is going to be a mad rush to finish the year with some solar work and service work.   So I am looking for less trading opportunities, and more fairly safe dividend stocks with decent yield.   Those that are making loans are likely to see less revenue as they have to compete with the Fed Funds Rates as the Fed has, amazingly promised to drop rates .25% in both November and December.   That should prevent an insurrection come January "transfer of power".   Notice it is not a "transfer of Authority" it is not a "transfer of responsibility".

 

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AI:
The claim that "the majority of these REITs are agency mortgage REITs, which means they own bonds guaranteed implicitly or explicitly by the U.S. Federal government" refers to the nature of agency mortgage-backed securities (MBS) that these real estate investment trusts (REITs) often hold.

Here's a breakdown of this guarantee:
Agency Mortgage REITs: These REITs invest in mortgage-backed securities that are issued by government-sponsored enterprises (GSEs) like Fannie Mae (FNMA), Freddie Mac (FHLMC), and Ginnie Mae (GNMA).

Fannie Mae and Freddie Mac are implicitly guaranteed by the U.S. government. This means that while the government does not explicitly guarantee their securities, it is widely expected that it will support them in case of financial trouble, as seen in the 2008 financial crisis.
Ginnie Mae securities, on the other hand, are explicitly guaranteed by the U.S. government. This means the government ensures the timely payment of both interest and principal to MBS investors.
How This Applies to the REITs Mentioned:

Annaly Capital (NLY), Dynex Capital (DX), Armour Residential (ARR), and others often invest in agency MBS, which are backed by these GSEs. This provides a level of credit risk protection due to the implicit or explicit backing by the U.S. government.
REITs like Ellington Financial (EFC) and Rithm Capital (RITM) may also hold non-agency MBS, which do not have government backing, exposing them to higher credit risk.
Government Guarantee:

Implicit Guarantee: For Fannie Mae and Freddie Mac, the federal government has historically provided support, although there is no formal, written guarantee. However, investors often treat it as highly likely.
Explicit Guarantee: Ginnie Mae securities come with the full backing of the U.S. government, making them more secure in terms of credit risk.
Supporting Evidence:
Fannie Mae and Freddie Mac MBS are considered safer than non-agency MBS because they are assumed to be supported by the government in times of distress, even though there is no formal written guarantee.
Ginnie Mae MBS is explicitly backed by the full faith and credit of the U.S. government, providing the highest level of security against default.
Conclusion:
The statement is largely accurate, as agency mortgage REITs invest heavily in MBS from GSEs like Fannie Mae, Freddie Mac, and Ginnie Mae. The level of guarantee depends on the issuing entity—Ginnie Mae securities are explicitly guaranteed, while Fannie Mae and Freddie Mac MBS carry an implicit guarantee.

For further reading on how these guarantees work, you can explore these resources:

Fannie Mae & Freddie Mac Overview
Ginnie Mae's Explicit Government Guarantee

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The concept that lenders will see reduced revenue due to having to compete with the Fed Funds Rate is generally accurate. Here's how it works and some further elaboration on the economic mechanisms involved:

1. Fed Funds Rate and Lending Revenue:
Lending Rates and Revenue: Banks and financial institutions typically generate revenue through loans, which are tied to interest rates they charge borrowers. When the Fed Funds Rate decreases, it can push down the rates on various loan products (like mortgages, personal loans, and business loans).
Competition with Fed Rates: As the Fed lowers its target interest rate, commercial banks must lower their own rates to stay competitive, which squeezes profit margins. Lower interest rates make loans less profitable because banks earn less on the spread between what they borrow at (the rate at which they acquire funds) and what they lend at (the interest charged to borrowers).
2. Future Rate Cuts:
Potential Cuts in November and December: If the Federal Reserve is expected to cut rates by 0.25% in both November and December, it could further reduce the revenue from lending operations. As rates drop, the yields on loans (such as mortgages and business loans) also decrease, especially when banks lend at fixed rates.
The Fed cuts are often implemented to stimulate the economy, but from the perspective of lenders, they reduce the profitability of lending operations by forcing lower interest rates on loans. This particularly affects smaller banks or institutions that rely more heavily on loan interest as their primary revenue source.
3. Political Context—Preventing Insurrection:
The phrase “transfer of power” likely refers to the peaceful transfer of political control after elections. In the context of rate cuts

The Demise of A Great Trader, Dutch, the "Market Sniper"

Dutch, aka Market Sniper. I consider him a friend although we never met, Unfortunately. He was always looking for "an edge" in trading, and he was always finding edges and sharing them. From the Slope of Hope, by Tim Knight.   

he first email came in August 2014.

TK, – Had my big meeting with the doctor’s yesterday evening and it is not good at all. Seems my diabetes has weakened my heart substantially as well as kidney damage. So, we are now on a strict regimen for controlling that. heart is so bad, candidate for a heart transplant. NOT going to happen. the good news is, cholesterol is good as blood pressure. Also, losing weight as directed. Down to 221! So, going to do whatever I have to do to stop the “bleeding” as it were. just to keep you informed. – – Dutch

And, six years later, I got this on the 4th of April 2020, only a few weeks ago:

Bad news. Just got out of the hospital. Stage 4 cancer, Went into the hospital Thursday morning. Not for dissemination on the Slope as we do not have a plan for dealing with this yet. Dutch

Of course, I said nothing. But, little by little, other folks found out, and rumors start spreading. And then, on Sunday, he was gone.

For those of you who are newer here, allow me to explain: there was a man who has been on Slope for many years by the name of Thomas Holland. His screen name was “Market Sniper”, and he went by the nickname of Dutch. Indeed, I can’t remember anyone referring to him on the site by the name “Tom”. It would be MS, or Snipe, or Dutch, or some other concoction.

For me, the simplest way to describe him would be Sam Elliott. He was a man’s man. Strong. Reliable. Sharp And not to be trifled with.

Now, I could never quite get a bead on what relationship Tom and I had. We were extremely different people. In fact, we had precious little in common, except for the fact that we were both on Slope a lot.

We had different views on just about everything. Tom was a hard-drinking, hard-smoking, gun-toting, tough hombre whereas I……………well………….let’s face it, I’m not any of those things.

But people here weren’t drawn to Tom because he seemed like a cowboy. They were drawn to him for his wisdom, his trading acumen, his gregarious nature, and his generosity. And Lord knows he contributed a lot to the site. One only need to glance around to see it here………….

…………..and there…………..

And even on SocialTrade, where his post was always way at the top for all-time popularity.

Mr. Holland and I had our run-ins from time to time, and it was always about politics. In fact, 99.9% of the reason I decided to make Slope a “politics-free zone” was because I was afraid I’d look out my door one day and see this:

For a lot of people, Market Sniper was the Slope of Hope. So much so that was organized a series of events – – usually in Las Vegas – – called SlopeFest, where people would fly out from all over the place just to hang out with Tom and other Slopers they had let online.

Here is a small sampling of photos from some of these events (only one of which I managed to attend). It’s easy to spot Tom, since he’s the one holding court, and he’s always the tallest guy in the room.

I think that, on the whole, Tom represented more to people on Slope than anyone else here, including myself.

To be utterly honest, I don’t think the guy was ever too crazy about yours truly, but it hardly matters. He liked what I had created, and he really liked the people it attracted. There has been, to this day, a tremendous amount of fondness expressed for Tom, particularly with respect with what he sought to teach others.

Although we had a peculiar relationship, I have always recognized what a giant the man was on the Slope landscape, and so when I put together my tome comprised of what I considered to be the very best writing I could offer over all these years…………..

No one could have been surprised to have seen what was just after the title page:

 

Tim Knight Is Still in the Game, Still Bearish LOL, And Has a Charting Platform That Does Arithmetic Operations on Multiple Tickers

 https://slopeofhope.com/page/custom-symbols.html

 

Yield Curve Inversions, and Important Historical Context

 
Here is a succinct table with the inversion start dates and their corresponding lengths for easy posting:

AI

Here’s a detailed look at some key yield curve inversions over the past 100 years, including the dates they occurred, whether the inversion resolved before the downturn, and what happened in the stock market afterward:

1. 1929 (Great Depression)
Yield Curve Inversion Date: The yield curve inverted in early 1928.
Recession Start Date: August 1929.
Market Peak: September 1929 (Dow Jones Industrial Average).
Resolution: The inversion did not resolve before the market downturn and the Great Depression began.
Outcome: The stock market crashed in October 1929, leading to the Great Depression. The yield curve remained inverted as the recession took hold.

2. 1973-1974 (Oil Crisis Recession)
Yield Curve Inversion Date: June 1973.
Recession Start Date: November 1973.
Market Peak: January 1973.
Resolution: The yield curve inversion resolved just before the recession began.
Outcome: The stock market had already peaked before the inversion. After the recession began, the S&P 500 experienced a significant downturn, losing about 50% by late 1974.

3. 1980-1982 (Early 1980s Recession)
Yield Curve Inversion Date: September 1978.
Recession Start Date: January 1980 (first recession), followed by another recession starting in July 1981.
Market Peak: The market saw volatility, but the major peak occurred in April 1981.
Resolution: The yield curve inversion resolved in late 1979, just before the first recession.
Outcome: The market experienced volatility and downturns during the two back-to-back recessions in the early 1980s.

4. 2000 (Dot-Com Bubble)
Yield Curve Inversion Date: February 2000.
Recession Start Date: March 2001.
Market Peak: The S&P 500 peaked in March 2000.
Resolution: The inversion resolved shortly before the recession began.
Outcome: The stock market began a significant downturn in late 2000, with the tech-heavy Nasdaq losing nearly 80% of its value by October 2002.

5. 2007 (Global Financial Crisis)
Yield Curve Inversion Date: July 2006.
Recession Start Date: December 2007.
Market Peak: October 2007.
Resolution: The inversion resolved in mid-2007, just before the recession began.
Outcome: The S&P 500 continued to rise until October 2007, but then entered a severe bear market, culminating in the global financial crisis and a 50% drop by March 2009.

6. 2023-2024 (Potential Future Recession)
Yield Curve Inversion Date: July 2022.
Current Status: As of August 2024, the yield curve has been inverted for 750 days.
Market Peak: The market remains volatile, with concerns about a future recession.
Resolution: The inversion has not yet resolved.
Outcome: To be determined based on future economic developments.

Summary of Patterns:
Timing: In most historical instances, the yield curve inversion resolved just before or as the recession began, though the market often continued to climb after the inversion, sometimes reaching new peaks before the downturn.
Market Impact: Historically, the market has tended to peak either shortly after the yield curve inverts or just before the inversion resolves, followed by significant downturns as the recession begins.
Current Situation: Given the current prolonged inversion, there’s heightened concern that a recession could follow, but the exact timing and market behavior remain uncertain.
This analysis underscores the importance of monitoring both the inversion and other economic indicators, as relying solely on the inversion could lead to missed opportunities or premature risk avoidance.

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The chart you've shared appears to focus on the inverted yield curve between the 10-year and 2-year U.S. Treasury yields. This inversion, where shorter-term interest rates exceed longer-term rates, is a significant economic indicator often associated with predicting recessions.

Key Points from the Chart:
Inverted Yield Curve (IYC) as a Recession Indicator:

The chart highlights the historical instances where the yield curve has inverted, typically signaling an upcoming recession. For example, it shows that the yield curve inverted in 1989 before the 1990 recession, in early 2000 before the 2001 recession, and again in 2006 before the 2008 financial crisis.
750-Day Inversion:

The chart notes that as of July 24, 2024, the yield curve has been inverted for 750 days, marking a prolonged period of inversion. Historically, such a lengthy duration is unusual and suggests a significant economic event may be on the horizon.
Correlation with S&P 500 (SPX):

The S&P 500 index is shown in gray, with the chart indicating that past inversions have often preceded significant market downturns. The correlation implies that the stock market could be at risk following a prolonged yield curve inversion.
Past Recession Indicators:

The chart clearly outlines past recessions shaded in red, showing the timing between the yield curve inversion and the subsequent market reaction or recession. This correlation is used to argue the predictive power of the yield curve.
Discussion on the Current Situation:
The current inversion lasting 750 days is historically long, which could indicate that the market and economy are in an unusual situation. Typically, the longer the inversion lasts, the more severe the recession tends to be. However, the exact timing and impact are difficult to predict.

Additionally, the chart suggests that the inversion tends to resolve before the market tops, implying that while the market may still be strong, caution is warranted.

Given the current economic environment, which may include high inflation, rising interest rates, and geopolitical uncertainties, the yield curve inversion serves as a warning signal to investors and policymakers.

Implications for Investors:
Investors might consider adopting a more defensive investment strategy, including reducing exposure to high-risk assets and increasing allocations to bonds or other safer investments.

Monitoring Federal Reserve actions, as well as broader economic indicators like employment rates and consumer spending, can provide further insight into when the inversion might resolve and whether a recession is imminent.

This yield curve inversion is a critical tool for forecasting economic downturns, and the current situation suggests heightened economic risks. Investors should stay informed and consider adjusting their portfolios accordingly.





You said:
so one could assume that it is safe to be long until the inversion resolves?   how haws that played out over the last 100 years
ChatGPT said:
ChatGPT
The notion that it might be "safe to be long" (i.e., holding a long position in the stock market) until the yield curve inversion resolves has been a topic of significant debate among investors and economists. Historically, yield curve inversions have been reliable indicators of upcoming recessions, but the timing between the inversion and the actual market downturn can vary widely.

Historical Analysis of Yield Curve Inversions:
Timing Between Inversion and Recession:

On average, recessions have started about 12 to 24 months after the yield curve inverts. This means that while the inversion is a reliable recession indicator, the stock market can still perform well for a period after the inversion before a downturn begins.
Market Performance Post-Inversion:

In many cases, the stock market has continued to rise even after the yield curve inverts, often reaching new highs before the eventual downturn. For instance:
1989 Inversion: The S&P 500 continued to rise for several months after the inversion before the recession in 1990.
2000 Inversion: The market peaked shortly after the yield curve inversion in early 2000, but then experienced a significant downturn during the dot-com bust.
2006 Inversion: The S&P 500 continued to climb for about a year after the yield curve inverted before the 2008 financial crisis.
The Longest Inversions and Market Peaks:

When the inversion period is prolonged, as in the current situation (750 days as of July 2024), it can complicate predictions. A prolonged inversion might suggest that the economy is under significant stress, and while the market might continue to rise, the risks of a sharper downturn increase.
How It Has Played Out Over the Last 100 Years:
1929: Before the Great Depression, the yield curve inverted in 1928, and the market continued to climb until the crash in 1929.
1973-74: The yield curve inverted in 1973, and the stock market continued to perform for several months before entering a severe bear market.
1980-82: The yield curve inversion in 1980 preceded a recession, but the market saw gains before the downturn.
2000: The yield curve inverted in early 2000, and the market peaked in March 2000 before the dot-com bubble burst.
2007: The yield curve inverted in 2006, and the market continued to reach new highs until late 2007 before the financial crisis.
Implications for Current Investors:
Given this history, the key takeaway is that while it might seem "safe" to be long during the initial phase of a yield curve inversion, caution is warranted as the inversion persists. The stock market can continue to rise after an inversion, but the risks of a significant downturn increase as the inversion prolongs. Therefore, investors should be vigilant and consider taking a more defensive stance as the inversion period extends, particularly if other economic indicators begin to show signs of weakness.

It's also important to note that every economic cycle is different, and past performance does not guarantee future results. While history provides valuable insights, market conditions, investor sentiment, and macroeconomic factors should also be considered in making investment decisions.





You said:
put more exact dates on those inversions, and whether the inversion actually resolved before the downturn
ChatGPT said:
ChatGPT
Here’s a detailed look at some key yield curve inversions over the past 100 years, including the dates they occurred, whether the inversion resolved before the downturn, and what happened in the stock market afterward:

1. 1929 (Great Depression)
Yield Curve Inversion Date: The yield curve inverted in early 1928.
Recession Start Date: August 1929.
Market Peak: September 1929 (Dow Jones Industrial Average).
Resolution: The inversion did not resolve before the market downturn and the Great Depression began.
Outcome: The stock market crashed in October 1929, leading to the Great Depression. The yield curve remained inverted as the recession took hold.

2. 1973-1974 (Oil Crisis Recession)
Yield Curve Inversion Date: June 1973.
Recession Start Date: November 1973.
Market Peak: January 1973.
Resolution: The yield curve inversion resolved just before the recession began.
Outcome: The stock market had already peaked before the inversion. After the recession began, the S&P 500 experienced a significant downturn, losing about 50% by late 1974.

3. 1980-1982 (Early 1980s Recession)
Yield Curve Inversion Date: September 1978.
Recession Start Date: January 1980 (first recession), followed by another recession starting in July 1981.
Market Peak: The market saw volatility, but the major peak occurred in April 1981.
Resolution: The yield curve inversion resolved in late 1979, just before the first recession.
Outcome: The market experienced volatility and downturns during the two back-to-back recessions in the early 1980s.

4. 2000 (Dot-Com Bubble)
Yield Curve Inversion Date: February 2000.
Recession Start Date: March 2001.
Market Peak: The S&P 500 peaked in March 2000.
Resolution: The inversion resolved shortly before the recession began.
Outcome: The stock market began a significant downturn in late 2000, with the tech-heavy Nasdaq losing nearly 80% of its value by October 2002.

5. 2007 (Global Financial Crisis)
Yield Curve Inversion Date: July 2006.
Recession Start Date: December 2007.
Market Peak: October 2007.
Resolution: The inversion resolved in mid-2007, just before the recession began.
Outcome: The S&P 500 continued to rise until October 2007, but then entered a severe bear market, culminating in the global financial crisis and a 50% drop by March 2009.

6. 2023-2024 (Potential Future Recession)
Yield Curve Inversion Date: July 2022.
Current Status: As of August 2024, the yield curve has been inverted for 750 days.
Market Peak: The market remains volatile, with concerns about a future recession.
Resolution: The inversion has not yet resolved.
Outcome: To be determined based on future economic developments.

Summary of Patterns:
Timing: In most historical instances, the yield curve inversion resolved just before or as the recession began, though the market often continued to climb after the inversion, sometimes reaching new peaks before the downturn.
Market Impact: Historically, the market has tended to peak either shortly after the yield curve inverts or just before the inversion resolves, followed by significant downturns as the recession begins.
Current Situation: Given the current prolonged inversion, there’s heightened concern that a recession could follow, but the exact timing and market behavior remain uncertain.
This analysis underscores the importance of monitoring both the inversion and other economic indicators, as relying solely on the inversion could lead to missed opportunities or premature risk avoidance.

REvisiting the Sahm recession Indicator...After the DOL Restates Employment in Prior Month by 800,000 Less

https://fred.stlouisfed.org/series/SAHMREALTIME

 

2013 Financial Prediction, at an Old Friends Site

A prediction from 2013 financial blog. 

I'll take a stab at some of that for you, AR, if you don't mind.

davidshelton - commodities, and especially precious metals, are considered to be a good hedge against inflation; precious metals are also considered a safe store of value in time of economic upheaval. A lot of folks expect to see inflation rising skyward because of all the fiat money printing that has been happening for the several years. Housing is a hard asset and folks expect real estate to rise in an inflationary environment also. CPI numbers are doctored compared to historical measures. In other words, the government(s) have made so many adjustments to how CPI is calculated that looking at a historical graph that plots the official CPI numbers becomes meaningless and misleading. It still has value as a measurement tool, but only in a relative manner, imho.

Long-term interest rates are heading higher because of the risk inherent in investing long-term bonds is rising and investors are no longer willing to accept the puny returns that may not even keep up with future inflation. There is also a point at which, when investors realized that the Fed may not continue QE forever, that the risk of principal loss became very real all of a sudden. Investors decided to demand a higher return to accept that risk. Normally, 10-year Treasuries trade at a premium to current (and expected) inflation instead of nearly equal. To get to a normal premium, we should probably see rates on 10-yr Treasuries at 3.5% or slightly more. The bond market has been manipulated by the Fed's QE and money printing, but that cannot be sustained forever. Eventually, yields will find their way to "normal" levels in spite of Fed action. This happens primarily because the debt levels of the U.S. have passed the point where investors considered further investment to no longer be "risk free." Thus, the effectiveness of QE has run its course and the Fed is no longer in control.

I don't agree with the common wisdom that says that inflation is coming, though. The demographics of the U.S. population don't support continued rising demand. The peak of the baby boomers has past its peak in consumption years and has begun to save, pay down debt, and prepare for retirement. That means less spending by the largest (93 million, adjusted for immigration) and wealthiest (in aggregate) generation in the history of the U.S. is beginning to consume less and this trend is almost assuredly going to continue until the next generation of meaningful size hits its stride in the early-to-mid 2020s. Thus, I expect falling demand in the U.S. (same thing happening in Europe and Japan) to cause deflation instead of inflation. I realize that I am swimming against the current, but this is where all my research leads me.

Initially, if this actually is the beginning of a new bear market (one never knows for sure until it is well underway), then there is likely to be panic by all those who believe they understand what will happen next. Many will flood back into "safe havens" like precious metals and Treasuries pushing prices back up temporarily. But, once the initial wave(s) recede and deflation begins to rear its ugly head, there will be a dash to the exits. There aren't many places to hide in a deflationary environment. Cash is usually king because it will buy more next year, next month, next week, or even tomorrow than it will buy today. Holding fiat money is a scary thing to do in crisis, I know. But that may be the best option. I don't mean holding cash in a bank account, either. Financial institutions are still over-leveraged and profits are being created by paper entries (and can disappear quickly with a small rise in interest rates or a sharp fall in equities or real estate). There is a lot of risk lurking in every direction.

My position currently consists of some silver coins, a little gold, and a lot of cash (building a position over time by systematic withdrawals).

I am not a survivalist (I know it sounds like it). I believe in a self-correcting political and economic system that has swung too far in one direction and needs a major crisis to bring about the necessary adjustments to get the country back on track. It's coming. but then I also believe that the worst will pass after a few years and that a better foundation will emerge from the ashes. If I'm right, there will be a lot of great bargains for those who are ready with enough dry powder and enough patience to take advantage of the opportunities (much lower prices again). Take heart, after the worst comes the best.

Hindenberg Omen -- Advanced Analysis -- Does the Steepness of the Rally Prior to a Confirmed HO Offer Any Predictive Value"

 stock here: I was reviewing some of my 90 some followers, and there are a number of names, even from a decade or so, that I recall well.   One of these is springheel_jack, IN 2013 HE WROTE ABOUT A CONTRIBUTOR.   I put his table into an Excel Form.

https://albertarocks-ta-discussions.blogspot.com/

https://albertarocks-ta-discussions.blogspot.com/2013/08/regarding-ho-signals-brilliant-analysis.html

I wonder if AI can find the recent Hindenberg indicators?

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The Hindenburg Omen is a technical analysis pattern used by stock market analysts to predict the increased probability of a market crash. It was created by mathematician and market analyst Jim Miekka. This omen is identified by a combination of market factors, primarily involving the New York Stock Exchange (NYSE).

Key Criteria:

New Highs and Lows: The pattern occurs when a significant number of stocks in the NYSE reach new 52-week highs and lows simultaneously, typically greater than a set threshold (such as 2.5% of all stocks on the exchange).
Market Uptrend: The market must be in an uptrend, typically indicated by the 50-day moving average or rate of change being positive.
McClellan Oscillator: A measure of market breadth must turn negative, signaling weakening momentum.

Confirmation: For the omen to be considered valid, there must be multiple occurrences of these conditions within a 30-day period.

Since 2013, there have been multiple occurrences of the Hindenburg Omen. For example, it triggered in May 2013 and was notably confirmed again in December 2021, shortly before the market turbulence of early 2022​ (StockCharts)​ (ChartSchool | ChartSchool)​ (Wikipedia). However, due to the indicator's propensity for false positives (it often doesn't predict a crash immediately), its use is somewhat controversial.

The omen is most relevant during periods of significant market instability, where conflicting signals (new highs and lows simultaneously) suggest market indecision or vulnerability.

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His basis: "I have always been interested that the number of sightings of the HO in a cluster does not seem to be a predictor of the strength or timing of any subsequent downturn. I have therefore been spending some time on the keyboard examining all the data associated with the recorded confirmed HO's going back to 1986." 

His qualifiers: "Rather than use the DJIA that Dr. Robert McHugh used, I have used the S&P as it probably gives a better indication of the wider market. You still get the same approximate proportions of declines that are regularly quoted for the HO. i.e. 25% of the time the market falls by 15% or more, etc."

His general observation: "The interesting thing though, is that while the number of sightings in a cluster is no real guide to the dimension of any decline, the pace of the rising market before a confirmed HO is. Generally, the majority of confirmed HO with subsequent major declines have come after the market has averaged a gain of over 0.08% per day since the low that followed the previous HO. How long ago the last HO occurred does not seem to affect this observation."

The data he uncovered: "The results of the HO which followed daily gains averaging over 0.08% were -31%, -30%,-21%,-18%, -15%, -10%, -5%, -3% and 0%. That's 6 out of the 8 declines of 10% or more. By comparison, in the case of all other confirmed HO where the average daily rise of the market was less than 0.08% the average decline after a HO averaged less than 7%.  And that was only brought up that high by a couple of outrider observations."

Wave Rider's Conclusion: "The interesting thing about the cluster of HO you are currently recording is that the average daily gain since the market low following the last confirmed HO is the second highest on record. That assumes the May/June HO is considered a different one to the August one we are currently monitoring (AR's note: correct assumption). This suggests the present HO could be a portent for a very significant market decline indeed."

An additional point: Hence the rule "The faster they rise the further they might fall". Incidentally, the average daily growth rate before the August 5, 2013 HO was 0.193%. That is by far the highest ever, except the doubtful Dec 1998 HO."

[AR:  Good lord, I hope readers appreciate the implications of that last "additional point".]

--------------------------------------------------------------------- From Seeking Alpha comment
I am very happy for you to use the material in your blog. To help you I have listed the fuller version of the data below. Just a few things to note in case anyone looks to pick holes. The list is from Dr McHugh but I use S&P data not DJIA so some of the days to low, days from low and quantum of decline may vary slightly from his original data. The average daily change % is calculated using calander days (it doesn't really change the results to use trading days ....it is just easier to divide by calender days).

McHugh included one HO in his list that includes only 1 observation. He also notes that the Dec 98 HO was only there by the very smallest of margins. If you discounted both of these the correlation of size of downturn to average daily market rise leading up to the HO is even stronger.

The key cut off on this short list is about 0.08%. A daily rise of more than that before a HO since the last low is almost always followed by a large decline while generally the decline is less if the daily growth rate was less than 0.08%.

Hence the rule "The faster they rise the further they might fall". Incidentally the average daily growth rate before the August 5 2013 HO was 0.193%. That is by far the highest ever except the doubtful Dec 1998 HO.

While a large decline is not assured it does seem more likely in this instance. For the doubters who might jump up and down if the market bounces in a week or two or three, I would point out that the largest declines usually take 80 to 120 days from the HO. The decline is a long drawn out tortuous event not a race to the bottom.

Date Signals % Decline Daily Chng from last low

22-Dec-98 2 0.0% 0.227%
16-Oct-07 9 14.8% 0.152%
20-Jun-01 2 21.0% 0.142%
21-Jul-98 1 17.8% 0.133%
24-Jan-00 6 4.9% 0.123%
14-Sep-87 5 30.7% 0.116%
11-Dec-97 11 2.9% 0.104%
09-Oct-95 6 30.0% 0.089%
11-Oct-89 38 9.5% 0.088%
02-Dec-91 9 1.0% 0.070%
12-Jun-96 3 6.3% 0.070%
27-Jun-90 17 16.8% 0.068%
13-Apr-04 5 4.0% 0.066%
13-Jun-07 8 7.2% 0.065%
15-Sep-00 9 9.3% 0.065%
26-Jul-00 3 8.4% 0.059%
07-Apr-06 9 5.5% 0.057%
31-May-13 4 3.5% 0.055%
15-Jun-99 2 4.1% 0.046%
19-Sep-94 7 4.4% 0.043%
25-Jan-94 14 6.8% 0.035%
03-Nov-93 3 1.2% 0.033%
21-Sep-05 5 2.8% 0.024%
20-Jun-02 5 20.7% 0.015%
02-Aug-10 5 7.0% -0.015%
12-Mar-01 4 6.5% -0.075%

As regards your friend Hinch, what a coincidence. I live in Hobart and my first apartment here was next door to one in a tower block owned by a Hobart geologist who now works in the oil industry in Canada. Hinch doesn't happen to own the unit next to my former home does he?

Inflation Favors The Wealthy, Therefore Expect Continued Inflation

Posted from DigiNomad at BPT

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Not much to say. We've entered the banana zone. It's good to be asset rich.

Here's some simple math (I'll post it because it's quiet and I'm working on simplifying this communication for clients and some courses I teach).

Middle class assumptions:
Year 0 annual living expenses = 100K
Year 0 assets in market = 50K
Year 1 asset inflation (market appreciation) = 10%
Year 1 adjustment to annual living expenses = 110K
Year 1 addition to assets in market = 5k (55K new total)
Net change in available assets relative to living expenses (aka wealth) = negative $5000

Wealthy / Elite assumptions
Year 0 annual living expenses = 200K
Year 0 assets in market = 1 million
Year 1 asset inflation (market appreciation) = 10%
Year 1 adjustment to annual living expenses after asset inflation = 220K
Year 1 addition to assets in market = 100k (1.1 million new total)
Net change in available assets relative to living expenses (aka wealth) = $80,000

Both groups experienced the same "positive" market outcomes in the year, but the outcome is clearly completely different. Then the wealthy congregate on CNBC,  Bloomberg and elite circles in coastal cities to gaslight the public about a "vibecession" because they're having the time of their lives with real life asset inflation that is only great for them.

 

Sahm's Recession Indicator

https://fred.stlouisfed.org/series/SAHMREALTIME