Dow - Jones or the Dow - Jones Industrial Average was one of the first stock market indices, and is often used as an indicator of US stock market returns. The Dow Jones Industrial Average , commonly called "The Dow" or "DJIA" - includes 30 shares of industrial companies.
The System (FRS) of the USA is an independent federal agency established in 1913 as a regulator of the country's banking system. Performs the functions of the of the United States. The interest rate of the Fed affects the loans issued by the Fed to commercial banks to replenish their reserves, which means that changing this interest rate “pulls” many direct and indirect effects on the economy, ranging from to forecasting of the lending market, consumer demand and investment in industry.
The interest rate regulation from the history can be divided conditionally into 4 phases:
1) After the next financial crisis, the phase of ultra low interest rates. The longest phase. Give the market a rest and gain strength.
2) interest rate increase (preparation before the financial crisis). As a rule, the market growth phase
3) "plateau" - the interest rate does not change at the highest values, corresponds to the market haya. But there were exceptions, for example in the 90s at a high% rate the market continued to grow and very strongly. The plateau usually signals a close reversal of the trend and the approaching financial crisis.
4) A strong drop in interest rates by the Fed signals the start of a new financial crisis and downtrend. As a rule, lower interest rates when the market is already collapsing.
An interesting picture is given by both 50,100 and 200 MA in combination with interest rate analysis. I have marked and shown everything on the chart. Perhaps we are now in a similar situation as in 2000. Then the price went under 50 and 100 MA and returned as it is now back. Then for 9 months, the interest rate did not rise at the maximum ("plateau"). These were all precursors to the financial crisis and market collapse. The interest rate began to decline, followed by the market ... It's funny that 50 MA crossed 200 MA making a death cross, followed by a strong market decline at the already quite low interest rates of the Fed.
I would especially like to highlight the situation of 2008 and a very strong crisis later. Then the price broke 50 and 100 MA, and now they bought it back. But after a very short time (about 2 months) the market collapse began. 50 and 100 MA went under 200. Having made a deadly cross. And how later the vertical collapse of the market. But there is one difference from the situation then and now. This is the interest rate. Before the intersection of 50 and 100 MA prices, phase 3 of the increase in the interest rate of the Fed "plateau", has already been passed. MA crossed when the Fed's interest rate began to drop .
In the current situation, we have not yet reached this phase. Another difference, then no one talked about such an unprecedented financial crisis in the media, the Internet. For all, he was a surprise. The global economic crisis next year is predicted by most experts and analysts. Everything always goes against the confidence of the majority. If they say that the crisis is "soon", get ready for the worst - it means everything is good, he will not happen now. He will come then when no one will wait for him.
I also want to say to believers in the growth of btc and the cryptographic market during the next financial crisis. Do not take the wishful thinking. Not a big fluctuation of the Dow Jones index just 16% brought down Bitcoin by 56% in November
If you believe in their conditional correlation. It is worth noting that Dow Jones was then at the very top of the price, and btc at the conditional bottom of the price.
2 months after the fall, the Dow Jones index returned to the previous price. And Bitcoin did not return to the previous price after half a year, and most likely this year it will not be trading above 6 thousand dollars.
During the financial crisis, no one will incur money in highly risky instruments. But bitcoin and all sorts of tokens, these are not just risky, but super risky tools. In this will not incur money, but will pull out to the maximum. Then you can see over the fantastic low prices cryptocurrency and the death of the majority. After all, their real price is zero. Most are created for temporary speculation.
When the common market and the global economy are relatively stable, in 2018 we saw a BTC drop by a factor of 6, and for some overly promising cryptocurrencies, for example, as ether, a drop of 17 times !!! From 1400 on the pump to 80 dollars for several months. It is in quiet time. Can you imagine what could be when everything is sad with the world economy? When will money and goods lose value? Then the fall of this promising will not be 17 times but 1700 times or complete disappearance. I am not even talking about more than 2000 thousandth menagerie of various Coin and tokens. Everything is built on the faith of people, faith in over profits in short terms. Belief in the promise of the creators of air. And the more faith in the promise that nothing is worth, the higher the price, and vice versa.
At the moment, they give you very good money on cryptocurrencies, use this time. I also believe that at a BTC in a certain very short period, we will see fantastic positive prices, but this is when the global economy of the world is in full bloom and on the rise.
This relationship between the Fed and the Dow Jones interest rate works well not only in the face of the financial crisis. But also the prediction of a fall in the price of the index itself.
The interest rate began to decline at the peak of the price long before the collapse of the index.
The FED is in big trouble - they know it - but they're keeping or presenting a calm head. Whilst monetary policy and fiscal policy often overlap and are interacted, what the FED has done now is to overreach on monetary policy to bail out all that's wrong with fiscal issues. In other words the 'implicit guarantee' that brought the last crash (in specific different circumstances), is back out. All the money printing - QE4 and interest rate cuts - would be in a healthy and sound economy? I don't think so. These are normally seen as life-support measures. Markets will of course love these two things, so I have little doubt now that the DJI may charge north in the short term above its highest high.
But the interference by the FED after they almost crashed the markets last year by increasing interest rates, is to create a market that is a bag of air. I mean that's fine for traders on shorter term time frames below the daily, where microtrends can be exploited. But in the longer term debts of all sorts are built into the DJI - most scary and unseen are derivatives debt which off-book is around $233 Trillion, only 10 times the US National Debt).
So if - or when - the bag of hot air pops - derivatives debt is gonna crash everything. How? Nobody will be able to pay. We'd be into counter-party risk materialised.
Risk is a probability. It is not 'seen' in the charts but it's there in the back drop. It is felt when something goes badly wrong. Various gurus with sound insights have estimated up to a 70% correction in the DJI. But that may not be allowed to happen. How? The DJI has a kill-switch to prevent massive drops in price over short periods. So if we get like a 5% plunge in one day, 'they' (not the FED) could just switch off the DJI - everybody goes home and it's gonna be all fine (I'm being cynical of course. LOL).
Some say that the FED is doing the QE and interest rate cuts only with the idea of making a 'soft-landing' for the DJI. Not a bad plan actually, if that end is achieved.
2 months after the fall, the Dow Jones index returned to the previous price. And Bitcoin did not return to the previous price after half a year, and most likely this year it will not be trading above 6 thousand dollars. "
BTC 3,000$ to 14,000$ :)
However, nice post.