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How Intermarket Signals Could Help to Avoid Major Crashes Three Crashes, One Pattern I've been testing whether intermarket analysis can help avoid major drawdowns when selling weekly puts. Here's what the data shows across three very different market crashes: COVID Crash (Feb-Mar 2020) Drop: -914.75 points (-22.87%) Duration: 29 bars, 41 days Signal: BEAR fired in mid-February, BEFORE the crash The macro composite dropped sharply as bonds rallied (flight to safety), credit weakened, and VIX exploded. The signal went red weeks before the worst of the selling. 2022 Bear Market (Jan-Jul 2022) Drop: -837.25 points (-15.25%) Duration: 137 bars, 199 days Signal: BEAR fired in early January, stayed red through most of the decline This was a slow grind lower as the Fed tightened. The indicator stayed in BEAR mode for most of the year, keeping me flat during the worst of it. Notice how the red background covers almost the entire decline. April 2025 Tariff Crash Drop: -770.25 points (-13.35%) Duration: 6 bars, 10 days Signal: BEAR fired in late March, BEFORE the drop The fastest of the three crashes - just 10 days. But the macro signals still deteriorated first. Credit (JNK) weakened, volatility spiked, and the composite crossed below its signal line before price collapsed. The Pattern Three different causes (pandemic, Fed tightening, tariffs). Three different timeframes (41 days, 199 days, 10 days). But in each case, the macro signals deteriorated BEFORE equities fell hard. The Core Idea Markets don't move in isolation. Before major equity drawdowns, stress often appears first in: TLT (Bonds) - Flight to safety begins JNK (Credit) - High-yield weakens as credit risk gets priced DXY (Dollar) - Strengthens as risk-off flows accelerate VIX (Volatility) - Fear builds in the options market The indicator normalizes each market using z-scores (standard deviations from 1-year average), then combines them: Macro Score = (TLT + JNK) - (DXY + VIX) When this composite trends down and crosses its signal line, conditions favor caution. When it trends up and crosses above, conditions favor risk. Why This Matters for Put Sellers Selling weekly puts has attractive math: 90%+ win rate, consistent premium. But the losses when they come are brutal (600% stop loss). One bad week can erase months of gains. The question isn't IF a crash will happen. It's whether you're holding short puts when it does. My 5-year backtest on ES 7DTE puts - using TastyTrades backtester: Without Macro Filter: 357 trades | 96.1% win rate Total P/L: +$63,492 Max Drawdown: 10.30% Profit Factor: 2.90 With Macro Filter: 200 trades | 96.0% win rate Total P/L: +$33,636 Max Drawdown: 2.91% Profit Factor: 3.51 Key finding: 72% reduction in maximum drawdown. Yes, fewer trades means less total profit. But avoiding the tail risk changes everything about position sizing and sleep quality. Current Status: A Challenging Environment Right now (January 2026), we're in a consolidation range. The macro score is hovering near flat, and with the 7-day EMA setting, signals are flipping almost weekly. This is exactly the environment where the indicator struggles: Range-bound price action No clear macro trend Frequent signal changes (whipsaws) Difficult to follow systematically I'm being transparent about this because it's real. The indicator seems to work well for catching major regime shifts but generates noise during consolidation phases. Work in Progress This is not a finished system. It's a research framework I'm actively developing. Areas I'm exploring: Signal method variations - The indicator offers 7 different methods (EMA Cross, Slope, Momentum, Multi-Confirm, etc.). Some may handle consolidation better. Longer smoothing periods - The current 7-day EMA is responsive but whipsaw-prone. Testing longer periods for range markets. Regime detection - Adding logic to identify trending vs ranging environments and adjust sensitivity. Combining with price filters - Using EMA20 or other price-based filters as secondary confirmation. The goal is to reduce false signals during consolidation while maintaining the ability to catch major turns. What It Catches vs. What It Doesn't Works well for: Major regime shifts with clear macro deterioration Gradual credit/bond stress building over days or weeks Events like COVID, 2022 bear market, April 2025 tariff crash Struggles with: Range-bound, choppy markets (like now) Overnight gaps from surprise news Idiosyncratic moves unrelated to macro Short-term whipsaws in flat macro environments How I'm Using It (Current Approach) 1. Check the indicator before opening new put positions 2. Clear RISK-ON (green, rising): Full position size 3. Clear RISK-OFF (red, falling): No new positions or reduce exposition The "flat/choppy" category is new - I'm adding nuance rather than treating it as binary. When macro is unclear, I'd rather miss premium than get caught in a whipsaw. The Honest Tradeoff What you give up: Fewer trades = less total premium False signals in consolidation Missed rallies when flat Requires discipline to follow What you gain: Avoided COVID crash: -22.87% Avoided 2022 bear: -15.25% Avoided April 2025: -13.35% Significantly better risk-adjusted returns Ability to size up when conditions are clearly favorable For me, avoiding those three crashes was worth the whipsaws in between. Your risk tolerance may differ. Try It Yourself I've published the indicator with multiple signal methods so you can test what works for your approach: EMA Cross (what I use) - Classic crossover Slope - Simple trend direction Momentum - Rate of change threshold Multi-Confirm - Requires 4+ methods to agree (more conservative) Indicator in related ideas below. What's Next I'll continue refining this approach and will share updates as I find improvements. Specific things I'm testing: Longer EMA periods for the signal line Adding a "flat zone" where macro is inconclusive Combining macro with price structure (above/below key MAs) Different parameter sets for trending vs ranging markets If you have ideas or are working on something similar, drop a comment. This is open research, not a black box. Final Thought Three crashes. Three different causes. Three times the macro signals warned before price collapsed. Is it perfect? No - the current consolidation proves that. But when the big moves come, they tend to show up in credit, bonds, and volatility first. I'd rather deal with some whipsaws during flat markets than be holding short puts when the next -15% hits. --- What macro signals do you watch? How do you handle range-bound environments? Let me know in the comments.

Long TLT/SPY 📌 Bonds Explained: What They Are, How They Work & Key Risks Bonds are one of the oldest and most important financial instruments in global markets. They are used by governments, corporations, and institutions to raise money, and by investors to earn income, diversify portfolios, and manage risk. At their core, a bond is a loan: The issuer (borrower) raises capital by selling bonds. The investor (lender) provides money in exchange for periodic interest payments (coupon payments) and the return of the principal (face value) at maturity. 🔹 1. What is a Bond? When you buy a bond, you are lending money to the issuer. The issuer promises: Interest payments (usually fixed) on a regular schedule (semiannual or annual). Repayment of principal (the original investment amount) when the bond matures. 📌 Example: You invest $1,000,000 in a 10-year bond paying 3% annually (semiannual coupons). Every 6 months, you receive $15,000 in interest payments. At the end of 10 years, you (hopefully) receive back your original $1,000,000 principal. 🔹 2. Why Do Companies and Governments Issue Bonds? Governments → Fund infrastructure, social programs, defense, or refinance existing debt. Corporations → Finance expansion, research, acquisitions, or refinance loans. Municipalities → Build schools, hospitals, and roads. Bonds allow issuers to access large pools of capital without giving up ownership (like stocks). 🔹 3. Why Do Investors Buy Bonds? Stable Income: Regular coupon payments. Capital Preservation: Return of principal at maturity (assuming no default). Diversification: Bonds often behave differently from stocks, balancing risk. Hedging Inflation/Interest Rates: Certain bonds (like TIPS) protect against inflation. Relative Safety: High-quality government bonds are considered safe-haven assets. 🔹 4. Key Types of Bonds Government Bonds Issued by sovereign states. Example: U.S. Treasuries, UK Gilts, German Bunds. Generally low risk, lower yields. Corporate Bonds Issued by companies. Higher yields than government bonds but higher risk. Municipal Bonds Issued by local governments or agencies. Often come with tax benefits for investors. High-Yield (Junk) Bonds Issued by lower-credit issuers. Higher potential returns, but much riskier. Inflation-Protected Bonds Coupon/principal linked to inflation. Example: U.S. TIPS (Treasury Inflation-Protected Securities). 🔹 5. Three Main Risks of Investing in Bonds Even though bonds are often seen as “safe,” they carry risks that investors must understand: 1️⃣ Credit Risk (Default Risk) The issuer may fail to pay coupons or repay the principal. Higher with corporate bonds and emerging market government bonds. Mitigated by credit ratings (Moody’s, S&P, Fitch). 📌 Example: If a company defaults, you may lose part or all of your investment. 2️⃣ Interest Rate Risk Bond prices move inversely to interest rates. If rates rise, existing bond prices fall (since new bonds offer better yields). If you sell before maturity, you could face a loss. 📌 Example: You bought a 10-year bond at 3%. A year later, rates rise to 5%. Your bond’s market value falls, because investors prefer newer bonds paying higher coupons. 3️⃣ Inflation Risk (Purchasing Power Risk) Even if you hold the bond to maturity, rising inflation erodes the real value of your returns. A 3% coupon loses attractiveness if inflation rises to 6%. 📌 Example: Your bond pays $30,000 annually, but inflation pushes up costs by $40,000 per year → you are effectively losing purchasing power. 🔹 6. Bonds vs. Stocks Bonds: Debt, fixed income, contractual obligation, lower risk, limited upside. Stocks: Equity ownership, dividends (optional), higher risk, unlimited upside. In a company bankruptcy, bondholders are paid before shareholders. 🔹 7. How Investors Use Bonds in Portfolios Income generation: Retirees and pension funds rely on coupon payments. Diversification: Bonds often rise when stocks fall, reducing portfolio volatility. Risk management: Safe-haven bonds (like Treasuries) act as “insurance” during crises. Speculation: Traders can bet on interest rate moves via bond futures and ETFs. 🔹 8. Bonds vs. Stocks: The TLT–SPY Correlation One of the most widely followed relationships in global markets is the correlation between: TLT → iShares 20+ Year Treasury Bond ETF (tracks long-dated U.S. Treasury bonds). SPY → SPDR S&P 500 ETF (tracks U.S. equities). 📈 Historical Relationship Over the past two decades, TLT and SPY have often moved in opposite directions. (The Correlation between SPY/TLT often hovers around 0.) Why? When stocks sell off, investors typically seek safety in Treasuries, pushing bond prices up (yields down). This negative correlation makes bonds a powerful diversifier in equity-heavy portfolios (60/40). 📌 Example: 2008 Financial Crisis → SPY plunged ~37%, while long-dated Treasuries (TLT) surged as investors fled to safety. March 2020 COVID Crash → SPY fell ~34% peak-to-trough, TLT spiked ~20% as the Fed cut rates and investors piled into Treasuries. 🐂 Strategy #1 (MA): Buy SPY when TLT crosses below the 95 MA. Sell SPY when TLT crosses above the 95 MA. 🔄 But the Correlation Can Shift In inflationary environments, bonds and stocks can fall together. 2022 is a perfect example: Inflation spiked → Fed hiked rates aggressively. TLT dropped ~30% (yields surged). SPY also fell ~19%. Both asset classes sold off simultaneously, breaking the hedge. 🐂 Strategy #2 (Re-Balancing): Buy TLT at the close of the seventh last trading day of the month. Sell TLT at the close of the last trading day of the month. Sell TLT short at the close of the month. Cover TLT at the close of the seventh trading day of the month. Higher Returns after rate hikes. 📊 Why This Matters for Investors In normal times: TLT acts as a counterweight to SPY, smoothing portfolio volatility. In inflationary shocks: Both can decline, reducing diversification benefits. Lesson: Don’t assume bonds will always hedge equities — context (inflation, Fed policy, growth cycles) matters. 📌 Practical Uses of the TLT–SPY Correlation Portfolio Diversification A 60/40 portfolio (60% stocks, 40% bonds) relies on the negative correlation. Works best when inflation is low and stable. Risk-On / Risk-Off Gauge If both SPY and TLT rise → markets are calm, liquidity flows into both risk and safety. If SPY falls while TLT rises → classic risk-off move (flight to safety). If both fall → inflation or policy tightening environment (no safe haven). Trading Signals Divergence trades: When SPY rallies but TLT also rallies strongly, it may signal equity rally exhaustion (risk-off brewing). Macro hedge: Long TLT positions can offset downside risk in SPY-heavy portfolios — but only in disinflationary or deflationary shocks. 🔹 9. EWJ–TLT Correlation: Japan Equities vs. U.S. Treasuries EWJ → Tracks Japanese equities (large & mid-cap companies). TLT → Tracks U.S. long-dated Treasuries. Unlike the classic SPY–TLT inverse correlation, the EWJ–TLT relationship is more complex, shaped by: Global risk sentiment (risk-on/risk-off flows). Currency effects (USD/JPY exchange rate). Japan’s ultra-low interest rate environment (BoJ policy). 📈 Historical Tendencies 1️⃣ Risk-Off Periods (Global crises → flight to safety): TLT rallies (U.S. Treasuries bid). EWJ often falls, as Japanese equities are highly cyclical and export-driven. Negative correlation dominates. 📌 Example: 2008 Crisis → TLT surged; EWJ plunged with global equities. 2020 COVID Crash → Same pattern: safety flows to Treasuries, Japanese stocks sold. 2️⃣ Risk-On Periods (Liquidity, global growth optimism): EWJ rallies with global equities. TLT may drift lower (yields rising on stronger growth). Correlation weak to moderately negative. 📌 Example: 2016–2018: Global growth rebound → EWJ rose, TLT fell as U.S. yields climbed. 3️⃣ Currency Channel (USD/JPY) Japanese equities (EWJ) are sensitive to the yen. A stronger USD/JPY (weaker yen) boosts exporters (good for EWJ). TLT rallies often coincide with USD weakness (yields down, dollar down), which can hurt Japanese exporters, adding another layer of inverse correlation. 🔄 Shifts Over Time Long-term average correlation: Mildly negative (similar to SPY–TLT, but weaker). During inflation shocks (2022): Correlation turned positive at times: TLT fell as U.S. yields spiked. EWJ also struggled due to global tightening & yen weakness. Both moved down together, breaking the hedge. 📊 Why EWJ–TLT Matters Global Diversification Check: Investors often think Japanese equities diversify U.S. equities, but they can be just as cyclical. Adding TLT creates the real hedge. Risk-Off Signal: When both EWJ and TLT rise, it may indicate global liquidity easing (rare but bullish). Currency Overlay: Always factor USD/JPY → sometimes EWJ’s move is more about currency than equities. 🐂 Strategy #3 (EWJ): When Japanese stocks are above their 150-day moving average, go long TLT (US long-term Treasury). When the average is below the 150-day average, stay out. The correlation between TLT and EWJ can serve as a breath signal. 📌 Conclusion: Bonds as the Foundation of Finance Bonds are the backbone of the global financial system, connecting borrowers (governments, corporations) with lenders (investors). ✅ Bonds provide regular income and capital preservation. ✅ They carry risks: credit, interest rate, and inflation. ✅ They are essential for diversification and risk management. ✅The TLT–SPY correlation is dynamic. Historically negative, providing diversification. In inflationary shocks (like 2022), the correlation turns positive, breaking the hedge. ✅ EWJ–TLT is a Global Macro Hedge, But Fragile. Usually inverse: Risk-off = TLT up, EWJ down. Sometimes aligned: Inflation shocks or synchronized global tightening → both down. Currency filter essential: USD/JPY often mediates the relationship. This makes EWJ–TLT correlation a powerful barometer of global macro regimes: Disinflationary slowdowns → Strong hedge. Inflationary crises → Hedge breaks. For investors, understanding bonds is crucial, even if you primarily trade equities or commodities, because bond yields influence everything: stock valuations, mortgage rates, and even currency markets.

TLT: Order Flow, Auction Process & Failures To Rotate Hey traders, If we zoom out to check the price action in TLT from a daily perspective, what do you notice? Every single time there is a failure to rotate (hinted via diamond labels), the new expansionary wave leads the market towards a new equilibrium point that so far has been found at much lower prices. I’ve circled each and every instance where these failures to rotate back up occurred. Each market is an auction process, and via the OFA script , we are able to get a pristine read of the constant ebbs and flows. The structure depicted via the script should also be a clear red flag that in this type of well-anchored bear market, being a hero typically gets you in trouble, so stay with the trend. Remember the two key main features of the OFA indicator: Magnitude: A major clue that will help determine the health of a trend is the type of progress by the dominant side in control of the trend. We need to ask the following question: Are the new legs in the active buy-sell side campaign as identified by the script increasing or decreasing in magnitude? Velocity: When it comes to the distance the price moves, the magnitude is only ½ the equation. The other ½ has to do with the velocity of the move or the speed. Was the new leg created after a fast and impulsive move? Or did price make a new low or high with the movement being sluggish, compressive and taking too long to form? A good rule of thumb is to count the number of candles it took to achieve a new leg. DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.

Yields and Bonds - Where are real interest rates going?3/3/20. Weekly Charts of TLT (20 yr bond ETF) vs TNX (10 Yr Treasury yield) compared. In order to crush high inflation, They raised interest % in late 70's - early 80's. As a result, the rate peaked in 1981 and 10 Yr Yield was near 16% and mortgage rate was 17-18%. People were getting 9% interest on simple CD from the banks. Today, 3/3/20, The 10 Yr yield briefly nose dived below 1% but then came right back up. Bond funds like TLT has been great investment so far but to think the ride is going to last much longer is not practical. Some people talk of negative yields and I always try to remind myself that I must assess Risk vs Reward, not what people say, and I also know that I live in a reality, not a fairy land. Creditors are going to want more return on their money soon or later.

Inflation Proxy Stablizing DoubleLine's Jeff Gundlach often refers to the copper/gold ratio as a proxy for U.S. yields. Although this is comprised of two commodities that tend to do well in rising inflation, it can be seen as a growth proxy as well, which in turn filters into where yields are moving. Market participants often allocate to copper when growth is trending higher and, conversely, gold when growth is muted. We currently have a record net-short positioning on copper which could suggest yields may move higher.