Watch the Damn 2 Year Yield

We have had several indicators swinging bearish but a big holdout has been the 2 year Treasury yield’s signal that the Fed had not yet gotten ahead of itself. Here is said 2yr predictably pulling back a bit with recent stock market – and economic – troubles.

Here is the big picture view. This picture tells us that the Bernanke Fed held rates too low (before Europe’s NIRP concoction you’d have thought they can’t go below zero) for too long despite the 2yr yield’s 2 years of insistence that the economy was going to improve. We of course had already allowed for that in January of 2013 with the Semi Equipment UP signal (side note: take a look at AMAT today and yes, I covered my SMH short this morning).

If the 2yr keeps rolling over and the Fed Funds keeps boinking upward, another positive macro signal will have fallen. It seems almost poetic that a Fed which had giveth too much could set up to taketh away or at least keep hammering the brakes after the vehicle has stopped exceeding the speed limit.

So my question continues to be, what kind of distortions did “the Hero” inject into these markets during the 7 years of monetary fire hosing after the “Great Recession” * and what will be their ultimate consequences?


* “Great Recession” being code for a righteous meltdown of previous Fed-instigated leveraged financial excess (on steroids).

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