Macro Must-See Chart: How to Determine if a Silver Bottom Has Formed? (2024/11/8)
This analysis report explores the trends in U.S. Treasury yields and their potential impact on the market, noting that Federal Reserve Chairman Jerome Powell's attitude towards rising yields may indicate that yields need to rise further to prompt market adjustments. Meanwhile, crude oil inventories are at historically low levels, global demand is strong, and the market outlook for 2025 is optimistic. Silver prices have rebounded, but analysts believe that the bottom has not yet been confirmed and key support levels need to be monitored for breakthroughs
Will U.S. Treasury Yields Continue to Rise?
Analyst: The chart below shows the trend of the 10-year U.S. Treasury yield after the Federal Reserve's first rate cut. When Powell was asked about the recent rise in yields, he seemed completely unconcerned, believing it might be temporary and not long enough to cause an impact (i.e., it won't lead to a tightening of financial conditions).
But the key point is, if this round of rising yields has not yet caught his attention, it means that yields must rise further until they force the market or policy to make adjustments.
Positive Fundamentals for Crude Oil
Analyst: Whether in the U.S. or globally, oil inventories are at seasonally low levels in modern history. Chinese demand remains weak but has improved, while global demand continues to hit record highs. In my view, the market outlook for 2025 is more optimistic than the general market expectations.
Schrödinger's Recession
Analyst: The U.S. stock market seems to be ignoring the steepening of the U.S. Treasury yield curve. There has been a clear un-inversion between the 30-year and 3-month Treasury yields, and due to rising yields, the spread between risk-free rates and junk bond yields has narrowed to the lowest level since the market peak in 2021 and the peak of the 2007 housing bubble.
This indicates that the market is largely ignoring risks, showing a high level of complacency. The un-inversion of the yield curve and historically low credit spreads remain one of the most reliable indicators of economic recession.
Silver Trading Plan
Analyst: We see that the current rebound in silver prices is in line with expectations, but does this mean the bottom has been confirmed?
Some believe this is just the beginning of a longer adjustment period, as current prices are still below key support levels, making it hard not to view it this way. However, if silver can break through this level again, it greatly increases the likelihood that this round of adjustment has ended.
I think the current trend is similar to the situation in mid-April 2024; observe the markings made in the chart below, a key condition is needed next to consider entering a long position.
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