With the release of this week's Gurhaven newsletter, we cover some of the top posts from Guruhaven.com from last week. I review just what's going on with Silver, with the likely levels to look out for. Plus our traders and investors from Guruhaven discuss US markets, NASDAQ, Forex, China and more. To view the Silver review and for the round up of great content Click here for the latest newsletter

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Guru Haven releases its weekly newsletter wrap up of some of the best posts from the week on the markets, macro news & trading ideas & trends.

The newsletter includes posts from our Gurhaven residents as well as a number guest contributors of traders and investors.

If you enjoyed the recent newsletter and are looking for macro news, trading ideas, education along with chart review requests on your favorite positions & trades from CTM and other traders and investors, visit
GuruHaven HQ & join the community free with referral code: Crush19 by clicking here

Disclaimer: Please note all information presented in the Guruhaven weekly newsletter and within the website and its community platform are presented for educational purposes only,  and does not represent financial advice in any way. If you require financial advice please seek a licensed advisor who can provide these services.

Crush The Market has recently been invited to be a In House Guru resident and content provider at Guruhaven.com.

The trading, markets and finance community currently has four Guru content providers, as well as a team of moderators who are providing daily ongoing content in the Lounge and Study Hall areas. With regular discussions and charts on US markets, commodities, stocks, forex and other trading instruments.

Recently Guruhaven just issued its first newsletter showcasing some of the best pieces of content shared by the content providers, moderators and special guest contributors. To view a sample of the content at Guruhaven.com download the newsletter PDF file below.

If you like the recent newsletter and are looking for macro news, trading ideas, education along with chart review requests on your favorite positions & trades from CTM and other traders and investors, visit the
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Disclaimer: Please note all information presented in the Guruhaven weekly newsletter and within the website and its community platform are presented for educational purposes only,  and does not represent financial advice in any way. If you require financial advice please seek a licensed advisor who can provide these services.

Guest Article Written By  - Trader, Pete Armstrong - Twitter: @PeteArmstrong

2018 is drawing to a close although the markets show no sign of going into holiday mode until the
machines are switched off and forced to take a break for a few days.

As a trader in the southern hemisphere it’s our annual summer holiday period for at least 2 weeks.
I always use this time to reflect back on the last 12months, draw a line in the sand and consider
the new game starting in January……It can be a satisfying time or very depressing period.

A traders life is not anything close to what society deems as “normal”, and as such no one but us
traders can really relate to what we actually go through.
This isn’t a story about how lonely trading is because I’m one of the weird ones who trades best
in total isolation. It’s just a fact we can go through things that no other career can throw at you
and a lot of the time we bring it upon ourselves due to the nature of this business and how us
humans are wired……I brought it all upon myself this year. Here is a story of a period I went
through.

It is amazing how easily you can lead yourself off course, down a path you know isn’t going to
end well, but at the time, in the moment, you honestly think you are making intelligent decisions.

The last few years have been hard in this game.
• Volatility contraction but now expanding dramatically forced me to alter my approach and
mindset towards the market (I struggled with the mindset aspect),
• Algo’s exacerbating “chop” in price action due to a number of factors made tight entries harder
than previous years,
• Politicians ramping up their desire to have public feuds,
• Geopolitical issues seem to be piling up, adding another risk to manage daily,
• Fake headlines from “Sources” that Algos react to with sudden bursts of price action that will
fade sometimes and not other times.

The list could go on, but markets are always evolving and we have to evolve with them, however I
found myself fighting these factors when in-fact I thought I was just working hard to adjust and
get on top of them.

This year I found myself so determined and focused on getting on top of this market that I worked
around the clock; sleep was optional and only when the body forced me or on weekends.

Down the Rabbit Hole I Go.

In my mind it was a case of; “Yes I know this isn’t sustainable or smart but if I can push through
this period, get on top of it, then I can rest, do all the right things and get back to a sustainable
balanced approach/lifestyle of making returns”

I would tell myself daily - “It’s just a phase the market is going through, this isn’t your first rodeo
you have been here before, you just need to grit your teeth and work through it.”

Telling myself to back off a little, ride it out with lower performance expectations whilst working
through fine tuning my approach would have been the intelligent thing, but with pressures of
performance and life etc, I was always feeling like my back was against the wall and I needed to
go harder at it not back off. Cue the Anxiety.
That last paragraph I think was the root cause of this stupid behaviour

Obviously my day to day trading thought process are extremely clouded in this exhausted state,
more errors were being made than normal, frustration builds and everything is second guessed.
Confidence evaporates.

The harder I tried the worse it become!

[ Side Story - I used to be a golf pro, and pros will play their best when they let themselves be free
of pressure and they believe in their ability to execute. The harder a golfer tries to “ steer” a shot
under pressure down the fairway the more they spray the ball all over the course. I was trying to
steer every trade instead of letting it just happen]

All this leads to crippling depression periods and constant anxiety.
The dark times are dark. Very Dark!

It takes rock bottom to snap me out of it.

Tired, exhausted, mentally drained, angry at myself, constantly sick, no confidence and for the
first time I truly can’t wait to step away from the markets.

I knew better, I made it all harder than it needed to be and I’m feeling to consequences of it.

I think I got stuck down the rabbit hole due to the pressures that I have on me. Some your typical
life pressure we all have, and likely some others all manifested in my head. Thats something to
explore during the time off.

When I return it will be fresh, back to basics, structure and discipline. Focus hard on not losing my
way again.

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Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.

Guest Article Written By: Robert Blake

When the US Federal Reserve raises interest rates it always affects the US dollar. In this case, the hike would normally reduce the inflationary pressure, and as a result appreciates the dollar. The latest decision to raise the target for the fed-funds rate to a range between 1.75%-2%, in June of this year, was due to a stronger economy and a healthy US jobs market.

We mentioned previously on Crush the Market how interest rates have been steadily rising since 2015.
With three to four increases forecasted for 2018, the graph of the Fed “dot plot” below illustrates how eight policy makers expect four or more quarter-point increases for the year.

Traditionally, interest rates in the United States averaged about 5.72% from 1971 to 2018, with Money Cafe reporting a high of 20% in March 1980 and a record low of 0.25% in December 2008.

Higher interest rates generally mean a lower economic growth, but also slower inflation. In the past, the best way to achieve full employment and stable prices was to set the inflation rate of the dollar at 2%, which would grow the economy at a healthy pace. The Fed hiked this year, in response to a growing economy and fear of rising inflation, increased interest rates by a quarter of a percentage point. Jerome Powell, Chairman of the Federal Reserve, remarked that the “economy is doing very well,” following the rate hike announcement. The graph below shows the historical Fed rates over a period of 47 years.

Historically, even with low interest rates the US dollar enjoyed favorable exchanges rates in relation to major currencies like the Euro or the Pound. Investopedia reveals that this is in part due to the US dollar being the reserve currency for much of the world. As a result of higher interest rates and a strengthening dollar, more Forex traders will be hedging on the US dollar.
FXCM outlines that the Forex market trades an average volume exceeding $5 trillion daily, and the current Fed interest rate plays a factor in determining the value of the US dollar. 

However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies. However, it is mainly its perception as a safe haven in uncertain economic times, which has been the main reason for its high value in relation to other currencies.

Bloomberg reported how the dollar spot index, which tracks a number of global currencies against the US dollar, rose temporarily immediately following the Fed announcement.

As was expected, however, the trend that the Federal Open Market Committee (FOMC) is following seems to indicate that it’s stepping up the pace of rate hikes, stating that economic growth should continue regardless. While the course of the increases will remain gradual, the perceived aggressive pace demonstrates how the FOMC is looking to tighten policy amid falling unemployment levels (which fell to their lowest of 3.8% in May) and national growth.

The following chart illustrates the historical date of the price-adjusted US dollar index published by the FOMC.

For now, the economic forecast indicates that core inflation will reach the Fed's target of 2% by the year’s end with an overall economic growth of 2.8% for 2018. As such, with a fourth and final hike projected for this year, the Fed indicated that it will expect more rate hikes in 2019. Despite the recent hikes, as part of their long term forecast, the committee indicated that they still see the rate increasing to 2.9% and peaking at 3.4% by 2020, with an estimated GDP increase of 2.4% in 2019 and 2% in 2020. In addition to upwards estimates for GDP and inflation, the committee also estimated a cut to their original unemployment projection, from 3.8% to 3.6% for the full year. Despite the current political turmoil in the US, the economy continues to look positive.

Author Bio: Robert Blake is a freelance financial adviser and consultant. Since gradating from university he has started writing finance articles online to help give readers a clearer understanding of the US and global economy. In his spare time he can be found visiting financial seminars.

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Stellar Run

Netflix has been on a tear over the last 12 months as investors continue to focus on the rampant rise of subscriber growth especially in the international market. From the image below you can see that domestic growth has been steadily rising in the US, however the real star has been international growth as Netflix has been introducing its content into several new countries.

Even more surprising has been the record surge in the stock from the start of this year now having risen 30% year to date.

Netflix stock jumped higher today in the futures market after the stock closed for trading as the market digested the earnings report. I have added the latest jump taken from CNBC.com where the stock has moved a further 8% after a strong day leading up to the earnings release. It seems the company cant do no wrong.

What Investors Are Ignoring

One of the key reasons why Netflix subscriber growth has been so spectacular has been due to the fact that Netflix pricing for its streaming services is extremely low. This is even more evident when you compare it to traditional cable / pay TV companies.

By keeping the pricing low its placed a huge strain on its cash flows, as the company has been spending record amounts of its cash as its business model clearly inst sustainable even though company is growing so quickly. With the chart below you can see its latest cash burn was staggering at $523 million for the most recent quarter.

Whats even more worrying is the company is forecasting to burn through a total of $4 Billion in 2018.

Original Content Is Its Achilles Heel

The other key reason for the massive cash burn for Netflix is its huge budgets spent on generating its own original content. Not only has it been rising every year for the last five years, but its expected to hit $7.5 + Billion based on forecasts. (See Below)

The company's historical content spending is as follows:

2018: $7.5-$8 billion (forecast)
2017: $6 billion
2016: $5 billion
2015: $4 billion
2014: $3 billion
2013: $2 billion

Netflix content also outpaces its competitors own content budgets by a significant amount with a spend of approximately double its closest competitors content budget.

The end result of Netflix business model is the company is knowingly placing huge strains on its balance sheet with the loss of billions in cash each year and rising debt which is sitting around $20 Billion to fund its yearly cash burn.

For the moment none of this matters as stock investors cheer the company on by bidding it higher and higher rewarding the company for such reckless spending that it clearly cannot sustain.

Why Low Rates Are Important?

Netflix like many companies listed in the US are more reliant than ever on low interest rates to fund their business model. If US Government 10 year bond yields continue to move higher it will spell disaster for Netflix and other companies who continue to accelerate their debt levels to fund their losses.

If yields move beyond 3% it will mean significantly higher interest payments and accelerate already high cash burn levels which could ultimately lead to bankruptcy under their large debt levels. However until that day its celebrations all round for investors as the fundamentals don't matter at all.

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The top 200 largest stock index in Australia (XJO200) has run into long term resistance in May as it failed to breach the 5925 level. After hitting the resistance level late April and early May the XJO index has fallen around 200 points from the recent high of 5925.

Since forming a double top and confirming the reversal lower in May, the XJO index of the top 200 largest stocks is set to continue to fall further as it takes a breather from the recent strong run over the last 12 months. The road ahead for the index isnt clear as a number of major headwinds are approaching making further gains difficult.

Monthly Chart Review

Can The XJO Breakout Of The 5925 Resistance Level?

From a number of technical indicators the XJO index is likely to pause from its recent strong rally higher as it runs into some exhaustion within its uptrend.

Since the the XJO index is in a uptrend that has been running for a number of years as shown in the chart below, its likely that the index will head lower towards its long term uptrend around the 5525 which is its first level of support. If the index continues on its reversal lower towards support it could be several months before we see the chance for the index to make another run higher towards 5925.

XJO Headwinds - Potential For A Break Of Long Term Uptrend

The momentum indicators are supporting a move lower over the next few months leading into earnings season in Australia. In addition the slow stochastic is approaching its peak upper level on the monthly chart and about to cross lower. If the slow stochastic crosses over like it did back in March 2015 (See chart below), we would most likely see considerable correction in the XJO index over a 12+month period resulting in a break of if its long term uptrend. If this was to occur the only thing that could potentially reverse the move lower would be consecutive drops in interest rates by the RBA and or Government stimulus.

Australia's Macro Headwinds Could End The Long Term Uptrend

The other headwind facing Aussie stocks for the remainder of the year and 2018, comes from the macro picture in Australia, as the slowdown of the real estate market has begun with prices starting to fall in Sydney and Melbourne in May (See article below). The property boom up until recently has been driving the economy and a large part of the GDP growth. However this appears to be over as a number of interest rates from the banks, has finally stopped the strong real estate growth in prices. Together with construction boom spending now falling as the banks continue to tighten lending standards likely to slow the economy as well.

Below is a few recent articles outlining the headwinds stocks, real estate and the economy are facing over the coming months.

Weekly Chart Review

The weekly chart of the XJO shows a similar story to the monthly chart, with the index making a double top as well as the momentum indicators falling as the buying spree reaches exhaustion within the XJO index.

The only difference with the momentum indicators is that momentum has turned negative sitting at -62.2 and the slow stochastic has turned several weeks ago and looks to continue to move lower of the next  few weeks.

On the weekly chart I would look out for a pull back in prices, potentially to the target area drawn on the chart around support of 5570. The key to watch is if the XJO index breaks down further closing below the blue uptrend line on the weekly chart.

If the weekly uptrend (blue line within target area) is broken all bets are off as we could see a move down all the way to around 5000 over the next few months.

Add in the earnings season which starts in late July, there is potential for a lot more volatility over the next 3 months.

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Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent Stock review  click the link below:

Telstra Goes From Bad To Terrible As It Closes Below Long Term Support

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.

Telstra is Australia's largest listed Telco and has been a favorite stock to own among retail investors due to its high dividends. However its popularity has been tested over the last 12 months as the share price has gone from bad to terrible, falling from a high of $5.85 as recently as July last year to new multi year low of $4.00. 

Up until October 2015 Telstra's share price had been enjoying a multi year bullish uptrend rally. However after breaking its long term uptrend In October & November 2015, the share price experienced a steady decline lower over the last 18 months.

Why Has Telstra Recently Crashed?

Telstra has a number of challenges that it faces over the next few years as a number of earnings drivers will be drying up quite dramatically over the next 3 - 5 years. This is leading to Telstra having to find new earnings growth drivers to replace existing declining earnings streams. So far though the market is not convinced as the share price is in a long term downtrend (See article below on losing earnings drivers)

In addition to the medium to long term challenges faced by Telstra, TPG Telecom announced last week that it is buying mobile spectrum and will begin to builds its own mobile network instead of being a re seller. (See announcement below)

This announcement which was released on the 12th of April spooked Telstra investors as they dumped the stock on the day, followed with more selling over the next few trading days falling to a new multi year low of $4.00 a share.

With a few trading days left in the month of April Telstra is set to break a key long term support level of $4.50 which could lead to even lower prices over the medium to long term.

Telstra Chart Review

Monthly Chart

Telstra's monthly chart  is not providing much positive news for its shareholders as the monthly chart is set to break another key long term support level of $4.50. (As shown on the chart with the 2 circled areas) If this is to occur the most likely direction over the medium term is towards its next support level of $3.85.

Momentum Indicators Confirm Bearish View

The monthly chart momentum indicator has been in the negative since late 2015 when the share price closed below its long term uptrend. Currently its heading lower again after making an attempt over the last 12 months to move back into the positive. The Slow stochastic shows a similar pattern as it struggles to swing higher.

Volume has also been above average so far this month with the significant falls experienced in April, which is also another bearish sign for the stock, that investors have been aggressive in dumping the stock.

Currently the price has recently popped higher after reaching $4.00 last week, as it closed on Monday at $4.21, which may indicate some short term relief for the stock after significant falls.

Weekly Chart

The weekly chart provides some positive news for shareholders despite its bearish similarities to the monthly chart.

Similar to the monthly chart the weekly support level of $4.50 was clearly breached recently which is not a positive for the stock over the medium term. However after reaching within days its next support level of $4.00 a share, it appears to have respected the $4.00 support level for now. 

Last week's candle showing a long tail pointing down also indicates buyers stepping in to bid the prices highers giving some temporary relief to shareholders after falling sharply from the $4.50 levels.

Although momentum indicators are strongly in the negative supporting the bearish outlook on the weekly chart, it appears that the indicators are about to swing higher which could see the price move towards its previous support level of $4.50 over the coming weeks. However we would need confirmation of the weekly momentum indicators turning higher to support this.

If the $4.00 support level fails to hold over the next couple of weeks the next level of support is $3.75. Given that the yield on the stock is quite high now with the recent price falls and we are coming up to earnings season in July August, its unlikely that we will see the stock fall below the $3.75 support level without an earnings and or dividend downgrade in the next few months.

Daily Chart

The daily chart of Telstra has been a classic downtrend cycle for some time, with the stock reaching the extreme points of the trend on several occasions as indicated on the chart below. Given that the share price had recently fell below the trend line on the downside briefly and recovered back within its down trend indicates that the stock may be oversold and is due for a short term recovery and possibly back to $4.50 resistance.

A close above $4.50 could see the stock move towards $4.75 which is possible if investors decide to take advantage of the dividend in the coming months.

The slow stochastic on the daily chart has swung higher as it reflects the recent bounce after touching $4.00 a share. Momentum is still negative at -0.46 so caution is warranted still, especially since the stock is in a clear down trend momentum with plenty of negative sentiment surrounding the stock.

Overall the stock's bearish indicators and long term downtrend warrant the title of going from bad to terrible.  For any new investors who have taken advantage of the new lower prices may find the current dividend yields higher enough to warrant the potential risks. However existing shareholder may not share the same sentiment consider they are nursing considerable losses in the share price over the last 6  - 12 months.

Given the medium term outlook for fundamentals  from a loss of earnings from some divisions of the next few years together, as well as increased competition from TPG Telecom and a long term downtrend, it appears that the stock will continue to disappoint.

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If you would like to view my most recent macro article on the US economy click the link below:

Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent review on Oil click the link below:

Crude Oil Set To Break 13 Month Bull Rally As Supply Continues To Rise

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.

Crude Oil Under Pressure From Rising US Production

Crude Oil is about to break its 13 month uptrend as rising US crude production is starting to break down the price of Crude Oil. This is despite OPEC announcing a supply cut some months ago to help stabilize the price of Crude Oil. 

If you take a look at the chart below of US  Crude production and Oil Rig count within the US, they both seemed to level out around September / October 2016 just as the last leg of the downtrend  of Crude Oil was playing out. Since making the lows late last year the rig count has been steadily rising with production levels rising along side the rig count albeit on a 1 - 2 month lag.

Record US Crude Production Leads To Record Glut

Since US crude oil production has been soaring for several months now, inventories have also been rising along with rising production. Compounding the issue is the US economy which has been slowing for close to two years now. Now the decline in the US economy is accelerating consumption demand for gasoline within the US is also falling. Hence you will notice on the chart below on the right the sudden spike higher in inventories. 

Crude Oil Monthly Chart Review

Since making multi year lows back in February 2016 touching USD $26.14 a barrel, Crude Oil had been steadily climbing for around 13 months. After closing above its downtrend line back in April 2016, Crude continued to march higher for the remainder of 2016 and into early 2017. With just 1 trading week left in the month of March, unless there is a major reversal this week Crude Oil is set to close below its 13 month uptrend with a large red candle.

Crude Oil Heading Towards $41.50 Target

Based on the current outlook of the Monthly chart with a clear break of the uptrend currently occurring for Crude Oil, the next level of support on a monthly chart is around the $41.50 - 60 level which is another $6.50 - $6.60 or 13.75% lower from the current price.

Looking at the momentum indicators below, they are both supporting the current weakness in the price, as Momentum even though is still positive is heading back towards zero. The stochastic momentum indicator is also showing that based on the current price of $48 would form a bearish cross. (See circled area within Stochastic indicator) Monthly stochastic indicators are usually more reliable indicator of change of trends as they are much longer time frame and take a long time to form.

Hedge Funds Change Direction As Crude Oil Prices Shifts

Up until as recently as February 2016 Hedge Funds had placed a record amount of long contracts (betting on higher prices) for Crude Oil. Since then Hedge funds have begun to reverse their bullish bets setting a new record for reducing the bets for higher prices. The swift change in sentiment among Hedge Funds and Traders was due to the price falling below the physiological $50 level.

Crude Oil - Weekly Chart Review

Taking a closer look at Crude Oil via the weekly chart you can see that the price tried to break higher numerous times back in January and February this year. However after reaching the the $53.80 - $53.95 level on several occasions the price collapsed a few weeks with a long red candle which I have circled on the chart.

Momentum Falls Below Zero

Momentum is currently sitting at -5.74 on the weekly chart having closed below zero in the first week of March as the bulls became exhausted and finally gave in to lower prices.

The weekly Stochastic momentum indicator has been falling for several weeks now confirming the weakness in price. Since both indicators are supporting the falls in price on the weekly and monthly chart, it suggests that there is a high probability that the weakness in Crude Oil will continue over the medium to long term.

Since Crude Oil has confirmed a close below the weekly uptrend 3 weeks ago, the next level of support on the weekly chart is $40.50 a barrel.

Watch For A Surprise Reversal Above $54

Although very unlikely to occur over the coming weeks, I suggest watching out for a potential reversal in price back to the current resistance level of just below $54 a barrel. There may be another attempt to break above $54 but will unlikely succeed with current oversupply issues facing the market with rising US production.  The reason why I suggest looking at for the reversal is if OPEC announces further cuts to their supply to attempt to stop the falls in price.

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If you would like to view my most recent macro article on the US economy click the link below:

Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent Stock/s review click the link below:

Russell 2000 Bullish Run Looks Tired As Momentum Falls

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.

US Interest rates have been steadily rising since the lows in July last year, as the market reacts to both inflation pressures, FED commentary and 2 rate rises in 15 months. As a consequence interest rates have risen around 1.2% for US 10 year Government bonds since July 2016. Rising rates has created a major headwind for the US economy, as the weight of the massive debt levels for consumers and companies are starting to have a weakening effect on demand dragging the US economy towards slower growth. In spite of slowing growth economy the US stock markets are or near all time record highs as bullishness over the Trump presidency have overridden a weakening macro environment as stock investors look to the future with optimism.

Market Pricing 100% For FED Rate Rise For March

Over the last few weeks the probability of FED rate rise in March has been climbing, as a series of press releases and comments from various FED officials, including FED chairperson Janet Yellen have shown their eagerness to raise rates this month. Due to FED officials comments the market has priced in a 100% probability of rate rise when the FED holds their Federal Open Market Committee (FOMC) meeting and release their statement on the 15th March US time. 

US  Government 10 year Bond Yields Set To Break Out Towards 3.00%

With the recent talk regarding interest rate rises by the FED this week and the market now pricing a 100% certainty of FED funds rate rising by 0.25%, Government bond yields have once again started to climb higher for two straight weeks reaching previous resistance of 2.62% last Friday. (See chart below)

The important factor to note for the 10 year bond yields is if the 2.62% level is broken and closes above the resistance level indicated for the week, we will see interest rates move progressively higher towards 3.00% which is the next level of resistance.

Higher Rates To Hit Corporate & Consumer Credit Debt At Record Highs

If US Government bond yields move towards 3.00% over the coming months, a situation which is likely if the FED raises rates this week. This is going to have a major effect on slowing the US economy even further. The extremely high debt levels in the US, that were built up during a low interest rate environment created by the FED is now beginning to cause some serious problems for the economy and eventually stocks as well with small increases in rates having a larger impact on considerably higher debt levels.

The reason rising US Government 10 year bond yields is such an important factor in determining the health of the US economy, is because the majority of debt products for consumers and companies are priced from Government 10 year bond yields. In other words everyone will experience a rate rise and be negatively effected because the US is drowning in debt, with consumer credit and companies debt levels excluding financials are at record highs. (See charts below)

Crush The Market addressed the negative effects that a significant rise in rates would do towards the US economy back in November as rates began to spike higher in November with the election of Donald Trump. To view this article click the link below:

Surging Bond Yields Signalling Pain Not Growth Ahead For US Economy

Since November's article the rise in yields has played out as predicted with a slowing in a number of key macro economic data announcements, as the economy continues to slow in a rising interest rate environment causing pain for consumers, companies and the economy overall.

Consumer Credit  Debt Led By Student & Auto Loans

The picture is no different for the average consumer who is struggling under record levels of debt, with debt levels rising by approximately 1 trillion since the previous peak reached before the global financial crisis in 2008 & 2009.

The majority of the gains in debt levels have come across from an exponential increase in student debt as tuition fees for college are far outpacing CPI increases. The other main contributor for such a significant rise in consumer credit has been the boom in auto loans to the average consumer. Auto sales had previously been booming from increasing in credit for a number of years. Now as consumers are tapped out with much more debt since 2009, delinquencies are rising in the auto loans market as higher interest rates are biting hard on consumers disposable income.

The rapid increase in debt since 2009 together with increasing rates since July last year, has already been felt within the economy as various parts of the economy are now showing further continued weakness.

Higher Rates Slowing Lending Growth For Consumers

The rise of around 1.2% in US Government 10 year bond yields since July has already started to impact demand for more debt by consumers over the last year. Since the start of 2016 loan creation growth has slowed dramatically from between 9 - 10% per year to a current growth level of between 4% - 4.6% pa. Although the growth rate are in the positive the accelerating of debt growth levels is impacting retail sales within the economy. For example auto sales from the Big 4 auto manufactures have fallen by up to 11% in January 2017 from a year ago. To view auto sales data shown in my recent US economy article Click here.

Atlanta FED Slashes Q1 GDP Forecast to 1.2%

In the beginning of February this year the Atlanta FED forecasting team had set Q1 GDP as high 3.4%. Since February economic data has been released showing further deterioration and slowing in the economy with economic data missing expectations. As a result of this the Atlanta FED has had to  continually reduce their forecasts all the way to 1.2% as of March 8th. Depending on pending new economic data releases in the coming weeks we could see Q1 forecast fall below 1%.

US Gasoline Sales Begin To Fall Again

US Gasoline sales have been in structural decline for several years now, as the chart has shown below falling by over 50% since 2005.  After reaching the lows in 2014 gasoline sales began to start rising again as the economy began to gather pace as jobs and debt accumulation began to accelerate. However recent data has shown Gasoline retail sales have once again resumed their downward trend and starting falling as weakness in the economy  from higher rates is started to effect consumer demand.

Federal Government Receipts Now Negative Y/Y - First Time Since Last Recession

Similar to Gasoline sales US Federal Government receipts were growing strongly up to 2014 reaching a growth rate close to 14% y/y. Since 2014 recent high Federal Government receipts have been falling dramatically over the last 2 years, having just recently turned negative falling -1.1% Y/Y for the first time since the last recession in 2008 /9. (See chart below)

Having a closer look at the chart on the right hand side, you will notice that the majority of the decline in growth rates occurred over a relatively short time frame in 2016. This coincides with the similar time frames when interest rates stopped falling and began to rise rapidly in the second half of 2016.

US Restaurant Operators Same Store Sales Falling

The most recent data available for restaurant same store sales has been released, showing that December 2016 same store restaurant sales are the weakest they have been for in 3 years. In addition Q4 comparable sales and traffic is also down from a year ago, indicating that the restaurant industry is reeling as consumers cut back spending out for food.

 Does A Rising Interest Rate Environment Matter To Stocks?

According to history a rising rate environment has serious implications to the future performance of the market. Since the 1970's 7 out of 8 occurrences where interest rates cycles began to tighten resulted in some large corrections in the stock market. With the last tightening cycle resulting in a 56% fall in the markets in 2009.

The tightening cycle has been running for close to 9 months now as has already had a major impact to the grow rates of the economy slowing dramatically over the same period. With the potential for another rate rise occurring this week, its quite possible we could see 3% US 10 year Government bond yields in the coming months playing further havoc on the economy. Based on the last 45 years of data a tightening cycle in the US has not be very kind to stocks either as the economy reacts to higher rates.

Warning! - The Insiders Are Rushing For The Exits

Company executives are selling around 10 to 1 relative to buying trades of company stocks despite record prices for stocks. The buyer / seller ratio is also on a downtrend since peaking in late 2015  and the beginning of 2016 (See chart below)

When executives are selling in such large amounts it usually means they are seeing the writing on the wall for future earnings and prospects for the companies they run. Perhaps since interest rates are rising and the economy is slowing its starting to place pressure on future earnings targets. The next quarter earnings may provide further insights, especially since companies are conducting record amounts of buybacks that are financed from previously low rates of  debt.

The recent strong performance of stocks in late 2016 and early 2017 has masked a serious deterioration in the US economy that started as early as 2014 - 2015. With interest rates about to break out higher on the way towards 3% we could see the last legs of the economy knocked out bringing stocks down with them as earnings will start to fall again with weaker consumer demand filtering through to lower sales results.

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Stocks Bullishness At Record Highs While The US Economy Is Approaching Recession

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Russell 2000 Bullish Run Looks Tired As Momentum Falls

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.