I was watching a video by "Game of Trades" dated August 31, 2021. He went over a JNK/TLT chart. I HIGHLY recommend it! It was the first time I had ever seen this chart. The shape at the end caught my eye. I thought, hmm. That looks a bit like the BTC (BLX) correction pattern.
So I first drew a JNK/TLT chart then put the black tendency line at the JNK/TLT tops. Then I added BTC to the chart. Then I added the curved historical tendency lines to the BTC chart. Plus I added a blue 4 year cycle theory linear line to the BTC chart. I'm not a 4 year market cycle theory person, but I included it for those who are. Black line (on BTC) - historical curved tendency line Blue line (on BTC) - 4 year market cycle theory line
I added vertical solid lines on the JNK/TLT chart at ratio highs and lows and drew them up into the BTC chart. Vertical dotted lines indicate other significant pivot points in the JNK/TLT ratio chart. JNK = SPDR Bloomberg Barclays High Yield BOND ETF TLT = ISHARES 20+ Treasury Bond ETH Vertical solid red lines - Ratio at a low Vertical solid green lines - Ratio at a high
The idea is when the market is taking on risk, the JNK/TLT ratio goes up. When the market is decreasing risk seeking safety, the ratio goes down. And the chart is a plot of this ratio.
As I mentioned above, on the BTC (BLX) chart I put the black historical curved tendency lines. Plus I put the blue linear (4 year market cycle theory) line for those who believe in this. Why? I think the JNK/TLT line offers another way to help determine that the top is in for BTC. So, no matter what theory you hold to, you can test it as the market matures. Nobody wants to get caught wrong footed stubbornly holding to a target price (including myself) based on theories and tendency beliefs, whichever they may be.
**CONCLUSIONS** **1)** BTC up/down tendency seems to trend with the JNK/TLT ratio. This makes sense. If a market is taking on risk, well that is good for crypto. **2)** The JNK/TLT ratio tops, bottoms, and pivots sometimes correlate with the BTC chart, but only sometimes. There were some bullseyes at times. **3)** The tendency line of the JNK/TLT ratio tops may offer another crypto top indicator. So keep an eye simultaneously to whatever belief you have for your BTC target price. If the JNK/TLT ratio touches the tendency line - watch out.
The game of trades video plotted it on the log scale, which doesn't make sense to me if you are plotting against TLT which is not a logarithmic sort of stock (like BTC). It's pinned against yields. TLT does have a theoretical cap and TLT has been moving quiet linearly over time, so that doesn't make too much sense to me.
If you plot JNK/TLT *linearly* it would suggest that we have peaked and are in risk off mode.
Why is it the logarithmic in this particular instance with these particular stocks the better way to look at this?
If you plot JNK/TLT *linearly* it would suggest that we have peaked and are in risk off mode.
Why is it the logarithmic in this particular instance with these particular stocks the better way to look at this?