Long Term - US 2y with SPY

23 thg 9

This 2 year plan is explained below.

Chart = US 2 year on the top // SPY on the bottom

To understand my charting and thought process, if you wish to, it’s best to start with the macro idea here. I’m tracking the US2 year yield. The peaks in ’89, ’00, ’06, ’18 and ’23 have created overturned cycles leading into recessions. Sure, the 2023 peak has not yet resulted in a confirmed - back dated - recession but the data is thick enough to predict one in my opinion.

I think an equally important point here is to understand that putting a chart together with as much information as you can on an encompassing idea over a longer period of time is beneficial. It is to me anyway. I’ve chosen to focus on the largest market in trading…the bond market.

So that being said, it’s probably best to just explain the lines and y’all can make your own conclusions.

Ingredients:
Vertical Lines
Red = SPY market tops. And note the following % loss
Green = SPY market bottoms that note the following % gains
(it’s hard to read yes…anyone can build the chart and see the #’s if they want)

Black = when a recession was officially declared. It’s always too late…FYI😊
Purple thick = when a 50bps reduction was mandated during FOMC. What I think is interesting here is that a -50bps cut happened 4 times during the ’07-’08 GFC, 9 times through the DotCom era and even 3x in the early 90’s. We’ll see a few more -50 in 2024-25 for sure and when interest rates are at 3.75-4.0 I’ll be mostly out of equities I think. If 2y doesn’t dead cat bounce from here I’m looking at as early as Q1 2025 to exit.

The rest is self-explanatory. Bond yields are getting ever increasingly more volatile // 370% swing low to high post Dot-com to 5000% post covid to 2023?!. WTF…lol. We can see it clearly in the RSI. S&P is getting more volatile since 2018 too. Nice for trading but not ideal for recent long term investors.

Horizontal Lines
Blue = the bottom channel-ish on the 2y yield. It’s my own idea, so take it with a grain of salt please. I’ll be borrowing money at 1.5% or so in mid 2026 and going long AF.

Of course as the charts evolve the thesis may get massaged but as an overall macro trend I don’t see a flaw in it yet.

I think that’s it. Stay well traders and all the best.

MR

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This chart has aged fairly well if I may brag a little 😊. The 2y did melt up in Oct and Nov. I had placed a blue arrow there upwards from Sept till now. I’m only generalizing on a monthly basis btw.

I’ll stick to the pink highlight line thesis for the 2y and be somewhat cautious in Q1-2 2025 for all holdings depending on the present charts. I’ll then decide to de-risk or not. Reading the above post will give context to that first sentence.

I have added the 3mo US (USO3MY) to the list to monitor its percentage. The 2y has un-inverted from the 10 which can be a 5-9 month lead indicator (on avg.) for a top in the market many say. The un-inversion for context was Sept 2024. The 3mo I think will give a tighter mark for the top…if the 3mo goes close to parity with the 2y a couple times I’m out within a month or so…If I miss the absolute top, so be it.

I will update this thread as time goes on. I still think the Bond market will tell me all I need to know.

Take care,
MR