Market Update 5/25/2024Going through the usual stuff, my portfolio, performance, losses, mistakes, good trades, lessons learned and opinions for the next weeks. First time I make it public though and I plan to keep doing it weekly
TLT trade ideas
Opening (IRA): TLT September 20th 83 Short Put... for a 1.08 credit.
Comments: Targeting the 52-week low here with a rung out in September (I've already got rungs on in April, May, June, etc.), which I think is unlikely to be touched in light of talk about the Fed cutting rates ... at some point in time.
Naturally, if I'm wrong, I'm also fine with picking up shares at a cost basis below the covered call setup I currently have on ... .
TLT wedgeTLT presents a wedge on a rising trend, this is bullish for risk on markets. As inflation remains sticky any report of easing inflation will cause TLT to break through this to the upside. Remember that if 20 year bonds rise, this helps alleviate the yield curve and drop shorter-dated bonds, this reduces overall interest rates. In a healthy market, longer-dated bonds should always provide more yield than monthlies, this is not the case for the last year plus because of the yield curve inversion.
-Late June or July this wedge breaks to the upside
-Rate cuts will follow
-Either the market pumps into elections hard, or we start to go into a recession
-I believe Biden will not allow a recession until 2025 due to elections
The Traditional 60/40 Portfolio ReimaginedThis is a snipet of a more extensive note on themacrobrief.substack.com
This trend of central banks accumulating higher gold reserves also holds true on a global basis.
This has huge implications for investors as foreign central banks hold lower US Treasury reserves vs higher gold reserves , it puts upwards pressure on US yields (Lower bond prices) and creates demand for gold resulting in higher gold prices.
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Traditional 60/40 portfolios are likely to suffer if this trend of replacing US Treasury reserves with gold continues.
Traditional 60/40 vs Modern 60/40 vs 60/20/20 Stocks, Bonds & Gold
Below are the results for a monthly investment strategy investing $250 a month from 1984 to today in both the traditional 60/40 stocks and bonds vs modern 60/40 stocks and gold and also a balanced approach which has 60/20/20 stocks, bonds and gold. The portfolio is rebalanced yearly.
The tailwind in bonds from a 40 year decline in interest rates contributed to long periods of outperformance for the traditional 60/40 portfolio, however the other two portfolios of modern 60/40 and 60/20/20 both produced marginally better performance.
Given the macro landscape developing from central banking behaviour and the uncertainty of inflation, interest rates, we could be entering a period where the modern 60/40 produces long periods of outperformance. Considering an allocation which diversifies bond holdings with gold could offer a lifeline for the traditional 60/40 and better prepare investors' portfolios to navigate the road ahead.
Whilst the traditional 60/40 stocks and bonds portfolio has been the portfolio of choice for the global trends of the last 40 years, the trends emerging for the decades ahead especially the reduction of foreign central bank holdings of US treasuries and the accumulation of gold as part of their balance sheet means that investors portfolios stand to benefit a great deal by considering a switch from the traditional 60/40 models, with the most likely beneficiary being gold.
Stay tuned for more insights on financial strategies, market trends and macro insights from The Macro Brief.
TLT Is Coming Into Key Support Within A Corrective DeclineTreasury bond TLT has been trading lower since the start of 2024, but after an impulsive rally at the end of 2023, we believe it's just making and finishing a deep A-B-C corrective decline. It's actually now coming into key strong support zone at 61,8% - 78,6% Fibo. retracement and channel support line, from where we should be aware of bounce, recovery and continuation higher back to 2024 highs. Just keep in mind that bullish confirmation is only above channel resistance line near 92.00 region, while invalidation level remains at 82.45.
Opening (IRA): TLT August 16th 85 Short Put... for a .98 credit.
Comments: Targeting the strike paying around 1% of the strike price in credit, adding to my position at intervals, assuming I can get in at strikes better than what I currently have on.
Opening (IRA): TLT July 19th 83/August 16th 83 Short PutsComments: Getting in at strikes better than what I currently have on in July and August.
July 19th 83: Filled for an .85 credit
August 16th 83: Filled for a 1.11 credit
I'm fine with potentially getting assigned with shares at 83, since they're way below the cost basis of the covered calls I currently have on. I knew this might end up being a very, very long duration trade that would potentially take time to work out, but ... yeesh, the weakness.
Will look to roll out the most at risk strikes I've got in July (at the 86) and August (at the 85) at some point ... .
Wedge Forming on BondsThis is a follow up to my previous post about NASDAQ:TLT and AMEX:TMF showing also backing my thesis from a more technical level.
I really think this is one of the best risk rewards on the market at this time and also acts as a hedge against stocks if we get bad market news
BONDS ARE THE WAYRight now rates have probably peaked or are close to peaking
I strongly believe vehicles like NASDAQ:TLT or AMEX:TMF provide some of the best risk reward for a long swing trade for the next few months. TLT is especially attractive due to its Yield being over 4% at this time.
If any fear of recession comes into play over the next year these trades will fly. Although you could buy calls I think holding the ETF is the trade since the yield is there for those who simply hold long. I also prefer TMF for large percentage gain since it removes the worry of Theta decay and allows you to average into a position over time.
Happy trading!
Weak Jobs Report -> Treasury RallyTLT long term bond ETF ripe for a swing trade to $92 coming off the
1. Hard landing concerns -> Treasury Bond Rally (TLT)
2. Faster Fed Rate cuts -> Treasury Bond Rally (TLT)
3. Inflation Dropping -> Treasury Bond Rally (TLT)
Very nice set upHere's a set up that will be meaningful: NASDAQ:TLT breaking out through the downtrend AND weekly EMA30.
The area to watch in the green box 👁️✍️
Opening (IRA): TLT July 19th 86 Short Put... for a .98 credit.
Comments: Adding to my TLT position on weakness here, targeting the strike paying around 1% of the strike price in credit.
I already have rungs on in April/May/June, so am adding a smidge out in July.
With QQQ and SPY knocking on ATH's, holding off on my usual broad market plays to await weakness and/or higher IV.
Contrarian PlayAlot of chatter about bonds breaking upward.
But I'm thinking there may a short term bounce
on the tlt -
Looking at May 10 $89 - $89.5 - $90 Calls
Lotto contrarian play - Ill see what they do in the morning
Inflation ratios for spotting fed rate trend part 7Inflation ratios for spotting fed rate trend part 7
TLT to $86 and 20 year yield to 5.2% by 5/3/24?TLT to $86 and 20 year yield to 5.2% by 5/3/24? I think the current break out by long bonds into the 5%'s has enough momentum to take the 20 year to 5.2% and TLT to $86. Bought into TMV on 4/24/24 and will hold until we reverse. The PCE report on 4/26/24 will confirm this move or invalidate it.
$TLT - Trade of the decade. NASDAQ:TLT runs inverse to the 10YTreassury note. The gap just below $85 should be filled when the 10Y goes back to 4.9%. When the gap closes and yields come back down, NASDAQ:TLT will be the place to park your money... NFA.
$TLT, the last bond rally before bear market continuation?NASDAQ:TLT seems to be setting up for one last move higher. I think we're likely to see a bottom of the short term move between around here at $92.
Then I think post fed meeting, we'll get a move in TLT up to the $98 resistance, that's where you'd want to be a seller of TLT or buy puts.
After that, I think largely the remainder of this year will be bearish bonds after the $98 resistance gets tagged.
I also think we'll see new lows (I know this is very opposite of what most people think will play out). This is also likely the catalyst that brings down the stock market (rates rise more than people think is possible).
Let's see how it plays out.
TLT Investment Opportunity // BuyTLT is back on level which took the liquidity on left side and impulsed a massive bullish movement, there is and identified breaker block before the liquidity was taken and also a fair value gap in yellow.
TLT... Time to Buy?Good R/R for a long down here, especially with a potential for a weekly hammer to set up a higher low from the 2023 bottom. Especially with a seeming "risk off" in the markets could be an attractive place to look for returns. Been bleeding for a long time... plus take a look at the volume since the bottom.. highest volume since inception at the bottom of the chart
TLTWe have a nice convergence on week chart. Normally, bonds start rise half year before recession, so I expect in next 2-4 weeks it will start rising.
1 target - 115$
2 target - 121$
3 target - 135$
But it`s long term investing - 180-360days, so better to wait when it will start rise.
$tlt What if this the Right shoulder?This could be forming a H&S bottom. Zero talk about it. Could reflation move be peaking? Are we in a recession or soon to be?
TLT Volume speaks volumes, pun intended.Don't forget that another man's trash, is another man's treasure. Volume speaks volumes, pun intended.
You know what to do...
Let's Not Be Blind to our Blindness..!Nassim Taleb's:
“My lesson from Soros is to start every meeting at my boutique by convincing everyone that we are a bunch of idiots who know nothing and are mistake-prone, but happen to be endowed with the rare privilege of knowing it.”
He also said:
"The only economic research that seems to replicate out-of-sample is the work of Daniel Kahneman on behavioral biases."
This phrasing reflects Taleb's critique of traditional economics and his acknowledgment of Kahneman's work on human decision-making, which can be tested and applied in real-world scenarios.
Taleb has discussed Daniel Kahneman's research on behavioral economics, particularly Prospect Theory, which studies how people make decisions under uncertainty.
A Wisdom from Daniel Kahneman:
Not only are we sometimes “blind to the obvious,” but also we are “blind to our blindness.”
We all have our own unique experiences and ways of thinking. This can make it hard to see things from a different viewpoint and recognize our own blind spots.
Here are some things you can do to overcome this blindness:
Be open to feedback: Ask trusted friends or colleagues for their honest opinions.
Seek out diverse viewpoints: Read books and articles from people with different backgrounds.
Challenge your assumptions: Actively question your own beliefs and biases.
By being aware of our limitations, we can start to see the world a little more clearly.
Prospect theory is a behavioral economics model developed by Daniel Kahneman and Amos Tversky in 1979. It challenges the idea that people make decisions based solely on logic and maximizing expected utility (total value of possible outcomes). Instead, Prospect Theory argues that:
Decisions are relative: We judge gains and losses relative to a reference point, often our current wealth or situation.
Loss aversion: People feel losses more intensely than equivalent gains. A $100 loss might feel worse than a $100 gain is satisfying.
Diminishing sensitivity: The impact of gains and losses diminishes as the amount increases. A $10 gain might feel more significant than a $100 gain.
Here's how these ideas influence decision-making:
Risk aversion for gains: When faced with choices involving gains, people tend to be risk-averse. They might prefer a guaranteed smaller gain over a risky chance of a larger gain.
Risk-seeking for losses: When faced with choices involving losses, people might become risk-seeking. They might choose a gamble with a chance to avoid a loss, even if the odds are not in their favor.
Prospect theory has numerous applications in understanding human behavior in various fields, including:
Investment decisions: Investors might be more likely to hold onto losing stocks to avoid the pain of realizing a loss.
Marketing and sales: Framing promotions around avoiding losses can be more effective than highlighting potential gains.
Public policy: Policymakers can use prospect theory to understand how people respond to incentives and risks.
Is it possible to be wrong and right at the same time???
My answer is Valid Yes..!
look at the following chart published 70 days ago
it moved in the opposite direction:
Now we can see why Claude Shannon said: “We know the past but cannot control it. We control the future but cannot know it.”
