12/30/2005

Current market commentator focus is on the recently inverting yield curve and the Economist's expected impact on the economy of moving to recession or slower growth. 

As a market technician, I am concerned with the impact on the stock market. Recession OR slower growth can result in a declining stock market.

In an attempt to provide a starting point for further analysis of the inverting yield curve I have prepared the following charts. 

In the following charts the Dow Jones Industrial Average is plotted over the spread of the yield on the US Government one year note and the ten year note. When the ten year yield is greater than the one year yield, the spread is plotted in GREEN. When the one year yield is greater than the ten year yield (inverted), the spread is plotted in red.

The first two charts are 35 year charts to show a long term perspective of past yield curve inversions.

The next four charts take the 1963 to 2005 time period and show them in 14 year segments to provide some greater detail to use to begin further study.

1991 to 2005

1981 to 1996

1971 to 1986

1963 to 1977

I'll maintain a current chart comparison in my weekly technical analysis page at Stock Index Timing .com and make comments on the situation in my weekly commentary at Stock Index Timing .com.

see www.stockindextiming.com

Good luck and good trading!

George

All aspects of any trade recommendations contained in this report are subject to modification at any time. 

ANY STATEMENT OF FACTS HEREIN CONTAINED ARE DERIVED FROM SOURCES BELIEVED TO BE RELIABLE, BUT ARE NOT GUARANTEED AS TO ACCURACY, NOR DO THEY PURPORT TO BE COMPLETE. A STOP LOSS MAY NOT LIMIT YOUR LOSS TO THE AMOUNT INTENDED. FUTURES TRADING INVOLVES FINANCIAL RISK AND SHOULD BE CONSIDERED CAREFULLY BEFORE MAKING ANY TRADES. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

YOU SHOULD BE FOREWARNED THAT SYSTEMS WHICH TRIGGER FREQUENT TRADING SIGNALS AS PART OF A DAY TRADING STRATEGY CAN RESULT IN SUBSTANTIAL COMMISSIONS AND FEES.

REGULATORY DISCLOSURES REGARDING HYPOTHETICAL RESULTS

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS EXISTS IN FUTURES TRADING