On July 1, 2024 it was noted that bond traders were preparing for a stock market decline. It still appears that a stock market decline is expected based on the following.
- The 10-Yr note rate decline starting in April 2024 is following the June – July 2007 decline with a 44.4 degree slope. (shown below)
- Futures trader’s 10-Yr Note Non-Commercial trades are still setup for a decline in rates. (shown below)
- Interest rates remain relatively high causing significant loan losses for regional and mid-sized banks.
- The number of banks on chart 13 of the FDIC problem list increased from 52 in fourth quarter of 2023 to 63 in first quarter 2024.
- The Dow is still following the 2021 structure time frame.
It looks like the Federal Reserve is following a path similar to 2007. On Friday, August 17, 2007, the Federal Reserve dropped the discount rate one half of a percentage point due to concerns about the subprime lending crisis. A FOMC meeting is scheduled for July 30-31, 2024 with no rate cut expected. A drop in the discount rate in August due to a “lending crisis” would provide a path for a significant market decline in 2025.
Stock charts courtesy of StockCharts.com.
