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S&P earnings yield: 6.4% 10 yr bond yield: 5.2% If the 10yr (and everything else) stays the same, SPX will have to rise 23% to reach parity. The best way to play this, in my opinion, is to hold the spread: short ZN, long ES, or the cash equivalent of those. Effectively, it is a bet on...

Stock prices will continue to rise and bond prices will continue to fall until parity is reached between the 10yr bond yield and the S&P earnings yield.

If you start with $100,000, at these rates of returns, your account balance would exceed the entire Russel 2000 capitalization in just 15 years. Think you can do it?

Hehe, "hope and pray". :) These two will not help you become a good trader.

I am going to teach this market a lesson, so that next time it respects the schedules that I set up for it. :)

The short sqeeze starts in exactly 3 minutes at 10:28am EST. We'll probably close unchanged for the day for major indexes. :) I am long ER2 from 840.10.

Ha ha, yes, it's a lot of fun to short the S&P 500 at 1503 and to see it go up to 1540 in a matter of days. :)

Actually, today my money is on the 1% to 2% drop in the major indexes by today's close.

Precisely!

Here is a link: http://www.elitetrader.com/vb/showthread.php?s=&postid=1376405#post1376405 You may want to change your phraseology when you change your user name. All these "we topped, guaranteed", "take it to the bank", "look out below", "you are dumb", "I manage a 12 figure hedge fund", and...

Welcome back. :)

There is a little contradiction here. If you throw the logic out, how do you use reason?

With his left hand, Makloda kills all black, grizzly, and polar bears today. :) However, I'll be net short today for the first time in a long time. This crush has been too convincing to be believable. We went up too fast today, so I expect a 10 ES points bounce back.

As I said, they do it by buing low and selling high. I know, this sounds like a joke, but it isn't. Take today, for example. After the China's 6% overnight drop, it was perfectly natural for the "logical", "break-out", and "trend-following" traders to go short at the lows of the morning. And...

If the "low hanging fruit" is a big spread between the S&P earnings yield and the 10-yr bond yield, it's still hanging low. If the "low hanging fruit" is range trading, it will always be there. Combine the two together, and you get a winner: short ZN, long ES, and buy more if the spread widens...

Here is something else to realize: the "bulls" and the "bears" are actually the same traders who buy low and sell high. So, it's not like the bulls are taking the money from the bears or vise versa, but rather professionals taking money from amateurs.

Hey, this is good stuff, thanks Makloda. I was looking for this combined set for some time.

I think you mean to say "profits", not "revenue". Just think of a company that had 1 billion in revenue, but it cost them 2 billion to generate it. You probably don't want to be invested in their stock.

In the new Beta API (version 9.2), there is way to determine if the stock is shortable: http://www.interactivebrokers.com/en/software/apiReleaseNotes/apiBetanotes.php?ib_entity=llc

ES stands for a certain financial instrument. Anyone who traded it to fade your call would be up about $700 per contract.