Diary Week 65: The Dominoes

As I have emphasized recently the 2007 analog that played out perfectly on the US 2-year yield from the highs set in October last year into mid-October this year tracked almost perfectly.

That seems like an almost unthinkable move but as I often say "The only thing unthinkable in financial markets is that anything is unthinkable"

The chart below shows where that target comes from

Of course, the "Million dollar" question is- what could generate a move of this magnitude in such a short space of time??

What might the Dominoes be?

There are some obvious ones (some more important than others)

See the full piece at https://shoe-fitz.rjobrien.com/diary-week-65-dominoes

However, I have also noted that this analog appears to be breaking down as per my 21st Oct note Parting Is Such Sweet Sorrow

and in the follow up note on 23rd October titled Be Afraid......Be Very Afraid

Those notes were a warning that the price action in markets (with the 30-year being especially interesting) and the backdrop today compared to 2007 at the same point appeared to be diverging. This dynamic is when an historic analog is most susceptible to breaking down.

When does a warning become a clear "change of view"?

That would come If we saw the US 2-year yield post a weekly close above 4.09-4.13%.

Such a break, if seen, would suggest a danger that we could be looking at an acceleration higher in the 2-year yield back over 4.4%