US02Y trade ideas
January 2023 projectionOn July 6th 2022, the 2s / 10s yield curve inverted, and it has widened its gap since then. An inversion of the 2-year, 10-year part of the curve is viewed by many as a reliable signal that a recession is likely to follow in one to two years. On May 27th 2022, US02Y piRSI levels were oversold the same as they are now on December 15th 2022. From May 27th - June 14th 2022, US02Y piRSI spiked and so too did the rate from 2.48% - 3.37%. Yesterday, FOMC Jerome Powell publicly stated that the peak rate will be higher for longer in order to minimize risk of a protracted bout with elevated inflation.
The new batch of quarterly projections from Fed policymakers shows the key overnight lending rate rising to 5.1% in 2023 and easing to 4.1% in 2024. The Fed now expects the unemployment rate to rise to 4.6% next year as GDP growth slows to zero. Wednesday 12/14/22, tickerTracker MFI crossed under the 50 level for ETF's SPY, DIA, QQQ & IWM. With all things considered, including Christmastime market seasonality and the above mentioned fundamental and technical analysis. The probability for January 2023 is for US20Y to spike up and US equity markets to go down as the new fear will be a downgraded MegaCap earnings season with recession looming on the horizon.
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BONDS YIELD PREDICTION!!!!! US02YDESCRIPTION: In the chart above I have provided a macro analysis for 2 year bond yield on the Daily Timeframe.
POINTS:
1. Since the beginning of this upward trend on January 2022 we have seen that bonds and the overall market are said to share an inverse relationship but during pivotal moments that has not been the case as you can see that the stock market has risen along with bonds and vise versa .
2. Deviation in SUPLY & DEMAND POCKETS is clearly shown to be every 1% RISE IN YIELDS . (Refer to BLUE & ORANGE Horizontal Lines)
3. Before entry is made into a new DEMAND POCKET price action has a distinctive pump that has occurred several times. (Refer to white lines between SUPPLY & DEMAND POCKETS).
4. Predicted rise was formulated by using the average of previous last two pumps of +40.92% and +54.21% = +48% when rounded.
5. Average does in fact coincide with previous point of resistance when bond yields rose to 6% in the early 2000's. (A POINT THAT I WOULD CONSIDER TO BE A PIVOT POINT)
6. When you observe MACD we can also conclude that downward pressure is looking for relief like in past occasions.
SCENARIO #1: Bond Yields continue to rise and follow uptrend into early 2023 which can then signify that a market bottom is yet to be confirmed.
SCENARIO #2: Bond Yields break crucial SUPPORT OF 4.000% and will invalidate current setup. Possibly being followed by capitulation in the stock market since falls in yields seem to be more closely tied to falls in the overall market than the inverse relationship.
TVC:US02Y
2 y 5 y 10 y bonds butterfly idea and historical returns hello
does anyone find me please an historical returns of a butterfly spread as follow -
long 1 2 years bond
short 2 5 years bond
long 1 10 years bond.
Does that make sense ?
It is a combination of 3 legs , using 3 instruments.
I am looking for some history and historical returns .
Thnak you
2Yr Yield creeping up slowly$TNX is closed atm but if the 2yr is an indication it may open higher
We re-entered long yield after FED day in DEC.
Sold puts on $TYO & bought common
Didn't go heavy because Monthly chart is a tad tough.
Weekly 2yr trading decently above avg's again
So far so good.
We were bullish on STOCKS but that was late Oct/Early Nov, then went bearish for a bit, & are now NEUTRAL.
EDIT:
Keep in mind that in BULL MARKETS items can remain OVERBOUGHT for long periods of time.
US02Y Showing the way to stock market recoveryThe US02Y has just completed a Head and Shoulders (H&S) pattern, which is a technical formation found on tops. The very same formation was last seen in October - December 2018 and caused a massive long-term drop on the US02Y. Check also the identical 1D RSI sequences leading to the top with Channel Down patterns.
The US02Y peak was translated into a fall on inflation (orange trend-line) and the stock market (S&P500 blue trend-line) immediately reacted. We've already seen a strong stock rally these past two months, but so far seems counter-trend.
Do you think the Fed and the CPI report next week can help sustain it?
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US02Y is the key for stocks and it has started to drop!This is a 1W time-frame chart, showing the correlation between the U.S. Government Bonds 2 YR Yield and the S&P500 (blue trend-line). Some may perceive the recent 2-month rally on stocks as a coincidence but the US02Y price action shows that it is not and has a direct correlation with it.
The 1W RSI on the US02Y has been falling within a Channel Down since the start of February 2022, while at the same time the actual price has been rising within a Channel Up. That is a technical Bearish Divergence. The same Bearish Divergence was last seen from late January 2018 up until the week of November 05 2018. As shown on the chart this lasted 41 weeks (287 days).
The start of this Bearish Divergence happened when the stock market(S&P500) had an initial pull-back event entering into a year long period of volatility, followed buy an even stronger correction. Once the US02Y started to drop, the stock market bottomed and started rising sustainably (until of course the non-technical black Swan event of COVID).
Right now, we are two weeks past the 41 week (287 days) mark and the US02Y has been dropping for 4 weeks. As mentioned, the stock market has been (aggressively) rising since the October 10 2022 1W candle. The fractals are identical and this could be a repeat of the 2019 rally. Whether we see it extending or not, the US20Y certainly holds the key.
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Treasuries After CPITodayโs cooler readings on inflation and jobless claims were welcome news for stock-market bulls. They could be even more important for the Treasury market.
Today weโre considering the yields of the of two-year (US02Y) and 10-year (TNX) notes.
The two-year shot to a 16-year high above 4.8 percent on November 4 after non-farm payrolls but failed to hold: a shooting star. Itโs also noteworthy that the data had a touch of โGoldilocks,โ with total jobs and unemployment both higher than forecast. Those headlines, and subsequent lows, potentially confirm the shooting star as a reversal pattern.
Thereโs also a rising trendline along the lows of August and September that was broken on Thursday. Both events may suggest two-year Treasury yields have peaked.
Next is the weekly chart of 10-year Treasury yields. They touched 4.33 percent in mid-October, the highest level since June 2008. Two inside weekly candles followed, potentially indicating a halt to the uptrend.
These patterns together, combined with the Euro solidly back above parity, could mark a change from the kind of price action thatโs characterized most of 2022. It could have a positive impact on broader sentiment if it continues.
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US02Y : The bond market agreesNow this is something interesting. The BOND market seems to accept the slowing down in Fed Rate Hikes by 25bps.
What was previously accepted as per 09/2022 dot plot was 75bps in 11/2022 + 50bps in 12/2022 for a total of 125bps to bring the FRR to 4.50% is now cut SHORT by 25bps. Instead of 4.50%, we may now expect 4.25% by end 2022, which is where it is now hovering.
If the dot plot can get superseded within a month, anything can happen.
Even the FFR Futures seems to be expecting LOWER FFR by the day.
www.investing.com
So the question that remain is ONE, which takes precedent, INFLATION or GDP?
By the way, yesterday, the 10y/03m just got inverted. It seems that a PIVOT may be near. Lets also see if US02Y will FALL below 50MA. This is also another indication a PIVOT may happen.
Yesterday's GDP =2.60% was good news for Dollar but just that it was made up of EXPORT which is clearly not sustainable/real.
Trading the EURUSD just hot harder!!!
Good luck.
P/S : As always, do not just believe what I say. Use your common sense.