On 17 September we wrote that the first of our two conditions had not fired: the 10-year had touched 5% and backed away, and a print is not acceptance. Six days later, it accepted.
The 10-year cleared the 2023 high near 5.02% on 23 September and has not closed below 5% since. On the 28th it closed at 5.24%, two basis points under the 5.26% close of June 2007, after an intraday high of 5.274%, the highest since that month. The 30-year reached its highest level since 2002.
That is the transmission our framework was built around, and it is showing up where we said it would. Thirty-year mortgage rates are above 7%. Existing home sales are at a one-year low. The S&P's forward multiple has compressed to 19 from 22. Tightening reaches valuations through the long end, not the policy rate; the long end has now carried what the dot plot signalled. Fed speakers have not softened either: Barr said further increases are likely necessary, and Williams that another hike late this year could be appropriate.
Today brought the first relief. August PCE came in lighter than expected, 3.4% headline and 3.0% core, and the 10-year eased toward 5.22% while the 2-year fell further. That is a pause beneath the 2007 high, not a move away from it.
The 2007 close at 5.26% is now the level. A close above it takes the long end back to the early 2000s. Held below, today's print becomes the first evidence the move is running out. Friday's payrolls are the next test.
$BTC near 83,500, 37% retraced on the grid we published. Last week it tested 87,000, the top of the 83–87k zone we published on 3 September, and was rejected; the rejection coincided with the 10-year's break to a 19-year high. Price has since come back through the zone and now sits just below the 38.2% retracement at 84,047, the first reference we named if the zone failed.
Bitcoin is set to close its best September on record, and all of that gain sits below the level that would change the structure. Acceptance above 87k is still what changes the picture. Below 84,047, the next reference is 74,136; the 23.6% retracement and July's resistance.
This week's trades
Profits taken across the short book: ZEC, LINK and the remaining alt shorts closed into target. Same structure each time: a level, confirmation of rejection, a written invalidation, a defined target.
One short remains open. Disclosure: it is a BTC short, held while writing the above. The zone and its invalidation were published on 3 September, before the position.
Open positions and full trade history since inception: app.binance.com/uni-qr/cpro/CapitalFlowTech
Levels and invalidations, not calls. Not financial advice.