There has been a great deal of talk lately about interest rates. OK there is always a lot of talk about rates, but since the 10-YR Notes have pierced the 3.000% level – that talk has increased markedly. Most of the discussion was about just how high will the yield go now that the special level of 3% had been breached. And you know what? I was one of them!
The markets are in constant flux, however, and conditions change rapidly – like interest rates. One of the most important things that I do every morning is view my proprietary algorithmic indicators across a variety of markets for changes. These markets include equities (of course), treasury’s, forex, oil, gold, and natural gas. There are many ETF products linked to these markets and they sure can change quickly given the “constant flux” in the markets.
As I was scanning the algorithms I saw an opportunity in the bond market. My indicator that tracks high frequency traders (HFT) showed me that they were VERY bullish early May 10th. The reading on my indicator was 95% bullish, which told me that there was a high likelihood of a reversal in bond yields. See the arrows in the chart below.
So from this knowledge, I recommended to buy the leveraged Treasury ETF of $TMF at $18.05. That price is within the green ellipse in the following chart. From that level, $TMF traded straight up and even gapped open higher Friday morning. My HFT indicator of “informed buyers” sniffed out this opportunity long before it happened and we took advantage of it. At the first resistance line, which was hit at the open, I recommended taking a partial profit and moving the protective stop higher.
Regular technical analysis is great for trading; however, powerful algorithms go much deeper into finding the right moves in the many indices. I plan on having many more updates like this in the future that cover all of the major markets.