Via Jeffrey Putman
The NIRP Crash Indicator, which had provided market crash warning signals throughout 2016, is no longer publishing signals. The signal is now at GREEN due to negative interest rates no longer being a significant risk to the global economy. See “Japan bonds, yen take a wild ride as central bank puts kibosh on yield rise”. The NIRP Crash Indicator was developed to warn investors about potential market crashes which had been much more probable in 2016 due to the spreading of negative interest rates globally.
After President Trump was elected, interest rates and yields in the US increased significantly. Global interest rates to remain competitive also increased significantly. The instituting of and the usage of negative interest rate policies by the world’s Central Banks has declined considerably. Finally, the amount of bonds outstanding which have negative yield has declined significantly. For all of these reasons, there is presently not a need for crash indicator.
The NIRP Crash Indicator’s signals:
- RED – full crash
- ORANGE – pre-crash-imminent
- YELLOW – caution
- GREEN – clear
About the NIRP Crash Indicator:
Impetus for development of the NIRP Crash Indicator was my research conducted on negative rates and the extreme volatility they caused, and are still causing, for the capital markets. See “Japan’s NIRP Increases Probability of Global Market- Crash Probability“, February 26, 2016.
For the NIPR Crash indicator to decrease from pre-crash ORANGE, or full crash RED, to caution YELLOW requires that the exchange rate between the yen and dollar be stable for an extended period of time, or that the dollar advance significantly versus the yen. An increase in the indicator from YELLOW to ORANGE requires a steady advance or a significant one-day advance of the yen versus the dollar. The NIRP Crash Indicator cannot go to an all clear GREEN signal until the negative interest rate policies being utilized by the world’s central banks and the negatively yielding securities trading in global markets have been eradicated. When the NIRP Crash Indicator was developed there was no intention for there to be a “buy” signal other than GREEN. However, because of its proven reliability the YELLOW signal, by default, became the buy signal for those who wish to trade the markets.
For the performance of the NIRP Crash Indicator for 2016 see “NIRP Crash Indicator Signals Very Reliable for 2016”, January 3, 2017.