Yield Spreads

First an admin note:  The reason we are not having many NFTRH+ updates lately is the same reason I kept NFTRH+ a free add-on to the regular service; I did not want to feel pressure to produce ideas when I feel the market is not in a low risk posture for those ideas.  Again, my preferred mode as a market trader is to find new trends and take advantage of them over the long-term, not to try to play dynamic frequency trader, which I have little interest in and do not enjoy.  To me, life is too short to be glued to trading screens every minute.

So today the market made shorts look good in the morning and then spun the dovish Fed story into a big reversal.  Bye bye shorts.

That said I took a short against SPY in the Trading Account on the big turnaround, simply because I think today’s pop is worth a shot.  No leverage, just a chunk of change thrown short against it.  I’ll keep the stop loss tight (above last week’s 208.61) and I also still have my Biotech and gold stock longs.  But cash remains the best repository in this market for a while longer yet I think.

Moving on, take a look at the 30 vs. 5 year yield spread.  It has now bounced to a similar point that it did in October’s market disturbance and during the corrective phase in January.  It has not changed its trend because like the two previous times it happened, it could reverse and pull a whipsaw.  But it is at another decision point and I wanted to call your attention to it.

30.5

The 10 year is up a bit in relation to the 2 year.  We’ll see how the ratio between them looks when we are able to get that chart tomorrow morning from Stockcharts.com (please let me know if you know of any live sources for the 10yr-2yr spread).

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2

Obviously, if yield spreads were to change trend we would move to our analysis right in line with that.  Declining yield curves have gone hand in hand with extreme confidence in Federal Reserve policy making and compliant equity markets.  A rising yield curve would signal the beginnings of a new phase.