Yield Curve Update (and Google)

The curve closed at its deepest inversion since 2000.  As noted in prior posts, the extent and duration of the inversion impacts/determines the validity of its "recession prediction" signal.  We are now in our second month of inversion.  The dollar has cracked.  Some stock market bellwethers, such as Google, Yahoo, eBay, and Intel have disappointed and/or guided lower and been sent to the woodshed for spankings (see Google’s chart and analysis, below).  On the other hand, some growth stocks have had a nice romp so far this year, although yesterday a number of them took hits, suggesting they may need a cooling off period.

Goog200622 Note the new all-time high in the first days of 2006.  Then the gap down a few days later to start off a 15% correction, which culminated in the 8.5% decline on record volume on January 20th (see the biggest red candle and tallest volume bar on the chart).  All GOOG could muster after that was two up days followed by a reversal which culminated two days ago with Google’s first ever earnings disappointment and resulting gap down, for a major violation of the stock’s 50-day moving average.  A close below Wednesday’s low will make GOOG’s current top official.  Cheers!

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