PropSense Macro Crash Early Warning System

A 9-signal macro crisis early warning system that monitors financial stress across Treasury yields, banking health, credit markets, volatility, the yield curve, currency extremes, interbank funding conditions, and real interest rates. It scores all signals using a weighted DEFCON-style threat model with built-in confluence detection, and alerts you when conditions are deteriorating toward systemic breakdown. Apply it to any daily chart — it pulls all data externally and works regardless of the underlying symbol.


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█ OVERVIEW

Financial crises don't appear overnight. They build through a sequence of deteriorating conditions across interconnected markets. The problem is that most investors monitor these signals in isolation — if they monitor them at all — and miss the compounding effect when multiple systems start breaking simultaneously.

This indicator solves that by pulling data from twelve different sources, evaluating nine distinct stress signals across three tiers, and combining them into a single weighted threat score mapped to a DEFCON 1–5 scale. Each signal has two thresholds — an amber Warning for early detection and a red Danger for confirmed crisis conditions. A dedicated Confluence Detector then monitors whether multiple danger signals are firing simultaneously — the single strongest predictor of a systemic crash.

The four-column dashboard displays everything at a glance: current values, warning/danger thresholds, and traffic-light status, alongside real-time liquidity conditions.


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█ THE NINE SIGNALS

Signals are organised into three tiers: Primary (weighted 1.0x), Secondary (weighted 0.5x), and Institutional (weighted 0.75x–1.0x).


— PRIMARY SIGNALS (Weight: 1.0x) —

Signal 1: 10-Year US Treasury Yield (TVC:US10Y)
The backbone of global asset pricing. When it breaks above 5% and sustains, it signals the bond market no longer trusts US fiscal sustainability — triggering a potential debt spiral. Uses "X of last Y days" sustained confirmation logic (default: 3 of last 5 days above threshold) so single-day dips from auction noise don't reset the counter.
• Warning: 4.5% | Danger: 5.0% sustained 3 of last 5 days

Signal 2: KRE Regional Banks Drawdown (AMEX:KRE)
Tracks US regional banks holding the majority of commercial real estate loans and small business lending. Calculates drawdown from a rolling 252-bar peak (1 trading year). A 30% decline signals systemic banking stress — hidden CRE losses surfacing, deposit flight, potential bank runs. KRE fell ~35% during SVB (2023) and ~60% in 2008.
• Warning: -15% from peak | Danger: -30% from peak

Signal 3: High Yield Credit Spread (OAS) (FRED:BAMLH0A0HYM2)
The yield premium junk bond investors demand over Treasuries — the single best real-time indicator of credit market health. At 3–4% the market is calm. At 6%+ credit is freezing: companies can't refinance, defaults spike, and corporate funding seizes. This pattern preceded Bear Stearns, Lehman, and the COVID crash.
• Warning: 4.5% | Danger: 6.0%


— SECONDARY SIGNALS (Weight: 0.5x) —

Signal 4: VIX (Fear Index) (CBOE:VIX)
Expected 30-day S&P 500 volatility from options pricing. Below 15 is complacent, 20–25 is elevated, and sustained readings above 35 indicate panic-level fear (COVID hit 82, 2008 hit 80). Uses the same "X of last Y days" sustained logic as Signal 1. A separate VIX Spike detector fires on 50%+ surges within 5 bars.
• Warning: 25 | Danger: 35 sustained 3 of last 5 days | Spike: +50% in 5 bars

Signal 5: Yield Curve (2Y–10Y Spread) (TVC:US10Y minus TVC:US02Y)
Every US recession since 1970 was preceded by a 2Y-10Y inversion. The critical insight: recessions don't start during the inversion — they start when the curve rapidly un-inverts. The indicator tracks four distinct states:
• Inverted — spread ≤ 0%: Warning
• Deep Inversion — spread ≤ -0.5%: Warning
• Rapid Normalisation — steepened 0.5%+ over 20 bars from negative: Danger
• Recently Un-inverted — curve was inverted within last 60 bars but normalised slowly: Warning
The "recently un-inverted" state closes a blind spot where the curve normalises gradually but recession risk persists for months after un-inversion.

Signal 6: DXY (US Dollar Index) (TVC:DXY)
A two-sided signal — both extremes are dangerous. A surging dollar above 110 crushes EM economies and tightens global financial conditions. A collapsing dollar below 95 signals loss of confidence in US assets and capital flight. If the dollar collapses while yields are rising, foreign investors are dumping both Treasuries and dollars — the worst scenario.
• Warning: ≤98 or ≥105 | Danger: ≤95 or ≥110 | Surge alert: ±5% in 20 bars


— INSTITUTIONAL SIGNALS (Weight: 0.75x–1.0x) —

Signal 7: Bank Funding Stress — SOFR minus IORB (FRED:SOFR minus FRED:IORB)
The modern TED Spread — a direct window into the banking system's plumbing. SOFR is the rate banks charge each other for overnight secured lending. IORB is the risk-free rate the Fed pays on reserves. When SOFR exceeds IORB by a meaningful margin, banks don't trust each other's collateral or solvency — liquidity is drying up. This is the first place you see smoke when a banking crisis is brewing. Interbank funding stress preceded Bear Stearns, the 2019 repo seizure, and SVB.
• Warning: spread ≥ 0.05 | Danger: spread ≥ 0.10 | Weight: 0.75x

Signal 8: Real Yields — 10Y TIPS Rate (FRED:DFII10)
Addresses a blind spot in Signal 1: nominal yields can rise because the economy is booming (benign) or because of a confidence crisis (dangerous). Real yields strip out inflation expectations to reveal the true cost of money. When the 10Y real yield spikes above 2.0%, money is objectively too expensive — it acts as a valuation vacuum sucking capital out of equities. Real yields surged above 2.5% during the 2022 bear market, which was driven primarily by rising real rates rather than credit stress.
• Warning: ≥ 1.5% | Danger: ≥ 2.0% | Weight: 0.75x

Signal 9: Confluence Detector (Calculated from Signals 1–8)
The "super signal." It counts how many of Signals 1–8 are simultaneously at DANGER level. Individual danger signals are concerning — multiple danger signals firing at the same time is a high-probability crash signal. When 3+ independent stress indicators converge, this is no longer a Warning — it's a Crash Imminent signal. Weighted at 1.0x (full Primary weight) because multi-signal convergence is the strongest predictor of systemic failure.
• Warning: 2+ signals at Danger | Danger: 3+ signals at Danger | Weight: 1.0x


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█ DEFCON SCORING SYSTEM

Each signal contributes to a weighted composite threat score:
• Normal = 0 points | Warning = 1 point | Danger = 2 points
• Points are multiplied by the signal's weight (Primary 1.0x, Secondary 0.5x, Institutional 0.75x, Confluence 1.0x)
• The raw score is normalised to a 0–100% threat percentage against the theoretical maximum

The threat percentage maps to DEFCON levels:
• DEFCON 5 — NORMAL (green): Threat < 15%. No significant stress detected.
• DEFCON 4 — GUARDED (amber): Threat 15–35%. Early warnings appearing. Increase vigilance.
• DEFCON 3 — ELEVATED (orange): Threat 35–55%. Multiple warnings or initial danger signals. Consider hedging.
• DEFCON 2 — SEVERE (red-orange): Threat 55–75%. Multiple danger signals active. Defensive positioning recommended.
• DEFCON 1 — CRITICAL (red): Threat ≥ 75%. Systemic crisis conditions across multiple signals. Maximum defence.

The dashboard header displays a DEFCON Duration counter showing how many bars the current level has been maintained — a fresh escalation (Duration: 1) demands immediate attention, while a long-standing level is an established condition.

All weights are adjustable. Set any weight to 0 to effectively disable a signal from the DEFCON calculation.


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█ LIQUIDITY DASHBOARD

Below the nine scored signals, the dashboard tracks Fed system liquidity in real time:
• Fed Balance Sheet (FRED:WALCL) — Total Fed assets. Quantitative Tightening (QT) shrinks this.
• Treasury General Account (FRED:WTREGEN) — The government's checking account. When it drains, money enters the financial system as a liquidity injection. When it refills (via Treasury issuance), it pulls liquidity out.
• Reverse Repo Facility (FRED:RRPONTSYD) — Overnight cash parked at the Fed. Near zero means this buffer is exhausted.
• Net Liquidity = WALCL − TGA − RRP — The effective liquidity available to financial markets. Displayed with week-over-week direction (▲/▼).

These are contextual metrics — they don't feed into the DEFCON score directly, but they show whether the financial system has the capacity to absorb stress or whether tightening conditions will amplify it into something systemic.


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█ DASHBOARD LAYOUT

The on-chart dashboard uses a four-column layout:
• SIGNAL — Name of each signal or metric
• VALUE — Current reading with contextual detail (days count, drawdown, curve state, spike flags)
• THRESHOLDS — Warning and Danger levels displayed in a dedicated column
• STATUS — Traffic-light indicator: green NORMAL, amber WARNING, red DANGER

Signals are grouped into five sections: Primary (Wt: 1.0), Secondary (Wt: 0.5), Institutional (Wt: 0.75/1.0), Liquidity Metrics (context), and a Score Breakdown footer showing weighted contributions by tier (P | S | I).


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█ HOW TO USE

Setup:
• Apply to any chart on a daily timeframe — the indicator pulls all data via request.security() from external symbols, so it works on any underlying chart.
• FRED data (WALCL, TGA) updates weekly and fill-forwards on daily bars. OAS, SOFR, IORB, DFII10, and RRP update daily.
• Position the dashboard via Display Options (left/right, top/middle/bottom, text size).

Monitoring:
• At a glance: check the DEFCON level, threat percentage, and duration in the header.
• Watch the Confluence Detector (Signal 9) — if it moves to Warning (2+ dangers) or Danger (3+ dangers), that is the single most actionable reading in the dashboard.
• Check Bank Funding Stress (Signal 7) — it's a leading indicator. If SOFR-IORB is at Warning while other signals are still Normal, pay attention.
• Use Real Yields (Signal 8) alongside Signal 1 to distinguish between benign and dangerous yield environments.
• The purple Threat Score line shows the continuous threat gradient over time, revealing gradual deterioration within a DEFCON level.

Alerts:
The indicator includes 23 pre-built alert conditions:
• Individual Warning and Danger alerts for all 9 signals
• VIX Spike (50%+ in 5 bars) and DXY Surge (5%+ in 20 bars) event alerts
• Confluence CRASH IMMINENT alert (3+ signals at Danger simultaneously)
• DEFCON escalation alert (crosses into SEVERE/CRITICAL territory)
• DEFCON 1 alert (threat ≥ 75%)
• DEFCON de-escalation alert (threat level improving from elevated)

Set these up in TradingView's alert manager to receive notifications via app, email, or webhook without needing to watch the chart.


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█ SETTINGS OVERVIEW

The indicator's 40 settings are organised into seven groups:
• Primary Signals — Danger thresholds, X-of-Y sustained days parameters, and KRE peak lookback.
• Secondary Signals — Danger thresholds for VIX (with X-of-Y logic), Yield Curve (including rapid normalisation speed and recently un-inverted lookback), and DXY (two-sided thresholds).
• Institutional Signals — Bank Funding Stress (SOFR-IORB) warning/danger spread levels, Real Yield warning/danger thresholds, and Confluence Detector thresholds for how many simultaneous dangers trigger warning/danger.
• Early Warning Levels — Amber warning thresholds for all Primary and Secondary signals.
• Signal Weights — Adjust the relative importance of each signal in the DEFCON composite. Set a weight to 0 to disable a signal.
• Display Options — Dashboard positioning, text size, and threat score plot toggle.

Every setting has a detailed tooltip explaining what it controls, why it matters, and what the default represents.


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█ DATA SOURCES

12 external data feeds (well within TradingView's 40-call limit):
• TVC:US10Y — 10-Year US Treasury Yield (daily)
• TVC:US02Y — 2-Year US Treasury Yield (daily)
• AMEX:KRE — SPDR S&P Regional Banking ETF (daily)
• FRED:BAMLH0A0HYM2 — ICE BofA US High Yield Index OAS (daily)
• CBOE:VIX — CBOE Volatility Index (daily)
• TVC:DXY — US Dollar Index (daily)
• FRED:SOFR — Secured Overnight Financing Rate (daily)
• FRED:IORB — Interest on Reserve Balances (daily)
• FRED:DFII10 — 10-Year Real Treasury Rate / TIPS yield (daily, ~2-day lag)
• FRED:WALCL — Fed Total Assets / Balance Sheet (weekly)
• FRED:WTREGEN — Treasury General Account (weekly)
• FRED:RRPONTSYD — Overnight Reverse Repurchase Agreements (daily)


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█ LIMITATIONS

• Best used on a daily timeframe. FRED data updates daily or weekly, so intraday resolution adds no information.
• FRED data has publication delays (1–2 days for daily series, up to a week for weekly). The dashboard shows the most recent available data.
• FRED:DFII10 (Real Yields) data begins in 2003 and has a ~2-day lag. For near-real-time real yields, compare TVC:US10Y minus FRED:T10YIE on a separate chart.
• FRED:SOFR and FRED:IORB data begins in mid-2018 (post-LIBOR transition). The SOFR-IORB spread cannot be evaluated before that date.
• The KRE drawdown uses a rolling peak that shifts forward in prolonged downtrends. Consider increasing the lookback to 504 (2 years) in sustained bear markets.
• The Confluence Detector counts signals at Danger only — not Warnings — ensuring it fires only on confirmed, high-conviction stress.
• This is a monitoring and alerting tool — it identifies conditions historically associated with systemic stress. It does not predict with certainty that a crash will occur, and past patterns do not guarantee future outcomes.
• This indicator is not financial advice. It is an analytical tool for educational and informational purposes. Always do your own research and consult qualified professionals before making investment decisions.


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█ NOTES

• The DEFCON scoring thresholds (75%, 55%, 35%, 15%) were calibrated by mapping how many simultaneous danger/warning signals were active during prior crisis periods (2008, 2020, 2022, 2023 SVB). They can be indirectly adjusted by changing signal weights.
• The sustained-days confirmation for 10Y yield and VIX uses "X of last Y days" logic rather than strictly consecutive days, preventing resets from single-day threshold dips.
• The yield curve tracks four states: inverted, deep inversion, rapid normalisation, and recently un-inverted. The "recently un-inverted" state (default 60 bars) closes a blind spot where slow normalisation still carries recession risk.
• The DXY signal is intentionally two-sided because dollar crises can manifest as either extreme strength (global liquidity crunch) or extreme weakness (loss of confidence).
• Bank Funding Stress (SOFR-IORB) is weighted at 0.75x because while it's an excellent leading indicator, the spread can occasionally spike from technical factors (quarter-end window dressing, Treasury settlement) rather than systemic stress.
• Real Yields (DFII10) solve the ambiguity in nominal yields by stripping out inflation expectations. A 10Y yield of 5% with 3% inflation (2% real) is more restrictive than 5% with 1% inflation (4% real) — and this signal captures that distinction.
• The Confluence Detector at 1.0x weight reflects the principle that convergence of independent stress indicators is the single most reliable predictor of systemic crisis — more reliable than any individual signal alone.