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Treasury yields rally may trigger a crazy Ivan event (again) in the market

Commentaries & Views

Since shortly after the US November elections, my research team and I have been clear about our research and our belief that the bullish rally in the markets would continue to drive the strongest sectors higher and higher. In December 2020, we shared an article suggesting our proprietary Fibonacci Price Amplitude Arcs and GANN theory indicated a major price peak could set up in early April 2021. On February 3, 2021, we also published an early warning that Treasure Yields were set up to prompt a big topping pattern sometime over the next 6+ months . We followed that up with a February 21, 2021 article suggesting future Gold and Silver price trends may be tied to the moves in Treasury Yields and the resulting stock market trends.

Now that the Treasury Yields have completed what we suggested would be required to start a "revaluation event" in the stock market, we believe that a "Crazy Ivan" event may soon setup in the global markets. Many months back (August 28, 2019), we published an article about precious metals were about to pull a Crazy Ivan price event (https://www.thetechnicaltraders.com/precious-metals-crazy-ivan-followup/). This prediction came true in 2020 and 2021. Now, we are suggesting the global markets may pull a new type of Crazy Ivan event – a price revaluation event prompted by the rise in Treasury Yields.

The Yields Setup

In our February 3, 2021, research article about the Treasury Yields, we suggested that a series of setup processes take place that prompt a broad market correction related to Treasury Yields. First, Yields must fall from levels above the Breakdown Threshold to levels below the Setup Threshold to complete the first stage of the setup. This first stage sets up the potential for moderate sideways price trends nearing a peak, or congestion. The second stage of this setup is that Yields must fall to levels below ZERO. This move creates the potential for one of two outcomes when Yields begin to rally.

  • If Yields rally back above the Setup Threshold and/or the Breakdown Threshold, but then stall and reverse back below the Breakdown Threshold, then the markets will likely stall/congest or enter a sideways/rolling top type of trend for a period of 2 to 6+ months.

  • If Yields rally back above both the Setup Threshold and the Breakdown Threshold and continue to rally higher, then the markets begin to start a sideways/correction event which we are calling a Crazy Ivan event.

We have highlighted all the areas in the charts below where the Yields have fallen to levels below ZERO on this chart and you can clearly see how the SPX reacted to these upside Yields recovery events. Every time (in RED) where the Yields rallied above the Setup and Breakdown Threshold levels, a broad market downtrend setup within 6 to 12+ months of this event. We believe the markets are about to do the same type of thing and we are calling it a Crazy Ivan event because we believe the current market setup is vastly different than the previous setups.

If the markets start to roll over and volatility continues to stay higher or rise, we can benefit from it with our Options Trading Signals which we use non-direction trades to sell premiums. This allows options traders to profit from volatility and not worry about which way the market moves.

The current Crazy Ivan setup

The following current Yields chart shows a more detailed example of what is currently taking place related to the Crazy Ivan setup. Yields are back above the 1.35 level on this chart and have quickly rallied above the Setup and Breakdown Threshold levels. If Yields continue to rally from this level, we believe the markets will quickly shift into a sideways/rolling top formation which will eventually prompt a new Crazy Ivan price event (a big revaluation event). If yields stall near these current levels and move back below the Breakdown Threshold, then we may still see a bit of sideways trading for a while, but usually the markets will begin to resume an upward price trend if Yields stay below the Breakdown Threshold.

The outcome hinges on what Yields do in the next 4 to 12+ months and we believe traders and investors need to prepare for big shifting trends in major sectors and indexes going forward. The setup process is already complete at this point. We are not waiting for anything to further complete this potential for the Crazy Ivan event. We are just watching Yields to see if they continue higher or stall and move back below the Breakdown Threshold. At this point, the Crazy Ivan price revaluation event is almost a certainty – it is just a matter of time.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.