Short US10Y yield + short USD. Long term opportunity.

[tsfx]

Hey,

I thought i'd give another long term trade idea: Short treasury note and short the USD (against eur/gbp/aud for example).

The idea is that yield rise and dollar strength don't go together sustainably. But in short term, fundamental mispricings (if you believe in such a thing) happen all the time. So, when they start to move in sync it means something is going on and that something will be completely offset as well.

Here's a chart, showing they started to move in sync from July. So, one of the two, usually both return to the original place.

 

[maxinger]

What an alien-looking thing.


Anyway, that was a good example of counter-trend trading.

 

[tsfx]

View attachment 325856

What an alien-looking thing.


Anyway, that was a good example of counter-trend trading.

Well excuse me and my paint skills, lol

 

[tsfx]

View attachment 325856

Anyway, that was a good example of counter-trend trading.

I don't really have a technical analysist mindset when i'm doing trades like these. Only % change (the "discount") and time matter here. If anything, i'd aggressively sell into any trend following signal, say a touch (not break) of upward sloping trendline. Works okay.

 

[maxinger]

I don't really have a technical analysist mindset when i'm doing trades like these. Only % change (the "discount") and time matter here. If anything, i'd aggressively sell into any trend following signal, say a touch (not break) of upward sloping trendline. Works okay.

The USD and the alien-looking thing are still on the uptrend.

Wait for some confirmation / indication before you short it.

Perhaps wait for the rising trend line to be broken.

 

[tsfx]

The USD and the alien-looking thing are still on the uptrend.

Wait for some confirmation / indication before you short it.

Perhaps wait for the rising trend line to be broken.

I might lose a lot of value when waiting for a trendline break which is way below. Makes sense to just jump on the train right now and use lower size with the option to average down higher.

I don't mind yields to keep rising from here (at already highs) because it'll start to have fearful implications/headlines if it does. I'm looking for trades where, if i'm wrong, it'll be really uncomfortable for other parties, say the FED, as well. So, please 10 year yield, by all means, hit 5.50% and higher because i would really like to see what happens to the yield curve, the JPY (and JGB's) and euro area yields and so on and how would the media react.

waiting for a trendline break means i'll have to wait for yield to 4.70% and lower. That's stupid because the yield can then trade back up to 5% again without causing any turbulence in headlines or the FED.

 

[maxinger]

I might lose a lot of value when waiting for a trendline break which is way below. Makes sense to just jump on the train right now and use lower size with the option to average down higher.

I don't mind yields to keep rising from here (at already highs) because it'll start to have fearful implications/headlines if it does. I'm looking for trades where, if i'm wrong, it'll be really uncomfortable for other parties, say the FED, as well. So, please 10 year yield, by all means, hit 5.50% and higher because i would really like to see what happens to the yield curve, the JPY (and JGB's) and euro area yields and so on and how would the media react.

waiting for a trendline break means i'll have to wait for yield to 4.70% and lower. That's stupid because the yield can then trade back up to 5% again without causing any turbulence in headlines or the FED.

I had that same mentality 4 decades ago.

It wouldn't be easy to change the mentality.

 

[tsfx]

I had that same mentality 4 decades ago.

It wouldn't be easy to change the mentality.

95%+ of my trades are purely algorithmic, so your "mentality change" doesn't really apply on me. The threads i create here are mostly based on long term "mispricings" so there is TIME to digest and discuss.

That mentality you are referring to is probably only about "averaging down every losing trade with the hope that there will be a retracement" concept. I'm talking about a little more than that. As i said, i don't mind the yield to go higher, at 5.50% the curve is not inverted anymore. Do you understand that this is a headline again? Implications for the stock market and so on? Doubt you thought like that 4 decades ago.

You were just a contrarian trader and averaging down and yes, that mentality is hard to change.

And btw, replacing that mentality with "i'm using disciplined technical analysis and stops now" doesn't have any more alpha hidden in it than that "avg down" strategy. You'll just lose slower.

 

[TrAndy2022]

Hey,

I thought i'd give another long term trade idea: Short treasury note and short the USD (against eur/gbp/aud for example).

The idea is that yield rise and dollar strength don't go together sustainably. But in short term, fundamental mispricings (if you believe in such a thing) happen all the time. So, when they start to move in sync it means something is going on and that something will be completely offset as well.

Here's a chart, showing they started to move in sync from July. So, one of the two, usually both return to the original place.

View attachment 325855

The USD is listening more 2 year yields than 10 years or 30 years. See here.

 

[tsfx]

Yield is yield, they move the same most of the time. Chart attached. If they don't then you trade the yield curve not the idea i proposed.

USD isn't listening any one thing. It is listening everything. And you never know which asset class will be leading and which one will be lagging.

I could use 2y as well but 10y is preferred since it's more popular and has a wider "mispricing".