Summary
- Yields are surging, and equities have generally risen. Is the positive covariance between yields and equities coming back? Would equities now rise with yields, and vice versa?
- That's looking like a possibility now. We should take profits from long trades which have done well. Wouldn't like to be wrong-footed here if equities start falling with yields, nonetheless.
- Were reinstate longs if/when markets makes higher highs. That way, we're out when/if equities come down with yields. If the negative correlation has not changed, then we just reset longs.
- The 10Yr yield has gone higher than we expected, and actually made new higher highs. We hold off with the long TN futures. Nonetheless, the equity value sector (Dow and Russell) are now rising along with rising yields, so in effect the positive covariance for value and yields is back. However, the Nasdaq is underperforming, as expected.
- Doing real-time validation of the models performed very well these past two weeks, since the start of the March month ($5,171,370 so far, 13 trades, no loss, 3 breakevens). Models suggest that we are topping out this weeks, but real-time technicals remain positive, and so we will continue to run long equity trades, until we get confirmation of a top from real time analysis. The FOMC meeting next Wednesday, March 17, may be pivotal, however. We will be out of the market by Tuesday, March 16.
flamarkMar 12, 2021 2:06 AM
gwizz1Mar 12, 2021 3:40 AM
Is this a reaction to yields?
flamarkMar 12, 2021 2:08 AM
I laugh because my charts looks like RB's. I usually try to mark everything but I need a TOS expert to tell me how to mark each index. The two indexes going up are NQ and RTY. The Blue is CL. The market has loosely followed CL for the past several days. Im long NQ and RTY (the leaders) right now.. but CL is a concern.
freer7Mar 12, 2021 11:33 AM
20y auction next Tue keeping yields bid?
gwizz1Mar 12, 2021 11:56 AM
Primary dealer holdings of Treasuries just dropped by the most EVER.
Are dealers already trimming bond holdings before the expiry of a key regulatory exemption on March 31?
It's certainly possible. https://t.co/eO1untjiJK pic.twitter.com/tR1TuglFiY
— Stephen Spratt (@StephenSpratt) March 12, 2021
john.derMar 12, 2021 12:24 PM
robert.p.balan - Comments here? The model being shown is in direct contrast to your modeling. Thanks.
john.derMar 12, 2021 12:34 PM
fwiw - I'm looking at overnight on 30yr futures (ZB). There was an unusual amount of volume late night which looks like accumulation for about a good hour after the route which created the bounce.
vlad.4649Mar 12, 2021 1:18 PM
Re: "Primary dealer holdings of Treasuries just dropped by the most EVER."
This may not be as dramatic as it sounds. And another explanation may supplement their theory.
The Treasury has been issuing high volume of "paper", especially short-dated. Settlements and expiry of paper is mostly in sync so no major change to PDs holdings would be recorded on an ongoing basis. PDs are the forced buyers of these securities.
Issuance of new paper was reduced in late Feb. Size of short-dated reduction is about 2 issuance weekly, and PDs portion is, say, about $30B and if you add other expiring paper which is not being reissued, like 273d sold last year, expiring in Jan/Feb/Mar, all expiring at maturity you easily get a $50B reduction in holdings just by looking at the short-dated securities, without any planned PD selling...
robert.p.balanMar 12, 2021 2:24 PM
This is ingenious and old news . . .
That data was of March 3. That was the week the 10yr yield surged due to the disastrous 7 yr auctions. The to top the yield was recently seen on March 8. Of course, the PDs were dumping paper that week because they caused the yields to rise sharply.
robert.p.balanMar 12, 2021 2:29 PM
Careful with what you see a Twitter -- sensational yes, but relevant? No.
It's very old news.
gwizz1Mar 12, 2021 3:07 PM
robert.p.balan sorry Robert. I will pay better attention
john.derMar 12, 2021 3:07 PM
Saw this on ZB this morning:
john.derMar 12, 2021 3:08 PM
Potential terminal wedge developing?
freer7Mar 12, 2021 3:48 PM
Treasury Dealers Offload Bonds as Regulatory Deadline Nears
Zoltan's latest report.
robert.p.balanMar 12, 2021 4:45 PM
Pozsar can rationalize it any way he wants it -- but JPM and other inv bank/PDs don't like the SLR whether or not it makes a difference in their asset cap.
RM13Mar 12, 2021 5:39 PM
Excellent thank you for sharing!!! Obvious solution - get rid of SLR and its related restrictions - wasn't that proposed in 2018 ?
U.S. bank regulators propose easing capital curb on leverage
federergoatMar 12, 2021 4:08 AM
robert.p.balan Master Jedi, what is the yield trying to do right now?
robert.p.balanMar 12, 2021 7:00 AM
FG -- it is probably doing the last (fifth wave) uptick illustrated in this chart I posted yesterday.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 7:12 AM
We will probably see a least 1.5900 with this rate of climb.
sf.85Mar 12, 2021 5:29 AM
robert.p.balan good evening sir. Wondering if you have an outlook on gold?
robert.p.balanModeratorLeaderOwnerMar 12, 2021 7:41 AM
Yields are surging, and equities have generally rise along. Is the positive covariance between yields and equities coming back? I am very mindful of the comment posted by john.der about the resumption of the negative correlation between bonds and equities.
So what would happen if yields come off? Equities will come down with yields? And vice versa? This is looking like a possibility now. Nonetheless, we should do something about our long trades which have done well. I would not like to be wrong-footed here if the former correlation does return.
The best is to make an exit now, take profits, and reinstate longs if/when the market resumes rising and makes new higher highs. That way, we will be already be out when/if equities come down with yields. Also, if the negative corr has not changed, and yields keep on climbing, we would sidestep any possible corresponding equity sell-off.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 7:49 AM
robert.p.balanModeratorLeaderOwnerMar 12, 2021 7:53 AM
all PAM EXITS LONG SCALPER TRADES IN YMM1, ESM1 AND THE LONG OVERHEDGE IN RTYH1, SELLS 288 CONTRACTS EACH OF YMM1, ESM1. AND 300 CONTRACTS OF RTYH1 -- ALL AT XXX DISCRETION
(THAT MEANS PUTTING ALL THESE TRADES AT THE JOINT ACCOUNT SO AS NOT TO PRESSURE A THIN MARKET AT THIS TIME, DISPOSED OF LATER DURING ACTIVE TRADE SESSIONS).
*YMM1 -- DONE AT 32,452 -- SOLD 288 CONTRACTS OF YMM1 LONG SCALPERS FOR ALL FUNDS.*
*ESM1 -- DONE AT 3929.50 --- SOLD 288 CONTRACTS OF ESM1 LONG SCALPERS FOR ALL FUNDS.*
*RTYH1 -- DONE AT 2343 --- SOLD 300 CONTRACTS OF RTYH1 LONG OVERHEDGE FOR ALL FUNDS.*
snortingelkMar 12, 2021 8:04 AM
Earlier I had a condition to exit ESM1 at downside breach of 3925, which triggered. Did I have that set wrong?
robert.p.balanModeratorLeaderOwnerMar 12, 2021 8:10 AM
The order was for breach of 3925. XXX boys told me there were no trades executed BELOW 3925 yet with the Prime Broker when I gave the order, which was before I started typing the notes.
snortingelkMar 12, 2021 8:18 AM
Ok. I had a rule set at less than 3925 in TD Ameritrade ThinkOrSwim. I think maybe it dropped very briefly to 3924.78 earlier. Just wanted to verify I was executing correctly. Thanks!
robert.p.balanModeratorLeaderOwnerMar 12, 2021 8:21 AM
You have to make a distinction between *quoted price*, and *executed price.* Retail brokers are sleazy with regards to this situation as they will not make a distinction when it favors them. Sometimes, they will even make the quote themselves if they want to take your order out. Prime Brokers hold to a much higher standard.
snortingelkMar 12, 2021 8:25 AM
Do PAM trade confirmations go out 24 hours a day? I noticed at the time there was no confirmation. Wasn't sure if that was because of the time of day, or because I executed wrong. Regardless, I will be careful to verify quoted vs executed. Thanks for the detail.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 8:29 AM
XXX executes after I gave the order. There might be a slight lag before I get the details but I get it within 10 minutes. Then I provide the details in the chat. So if the trade was executed when I am sleeping during Asian trading, the confirm has to wait until I am back at the desk.
snortingelkMar 12, 2021 8:31 AM
Thanks. Everything is clear.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 8:37 AM
all PAM BUYS 288 SCALPER CONTRACTS OF YMM1 AT BREACH OF 32510, GTC, FOR ALL FUNDS
all PAM BUYS 288 SCALPER CONTRACTS OF ESM1 AT BREACH OF 3940, GTC, FOR ALL FUNDS
all PAM BUYS 300 CONTRACTS OF RTYM1 AS OVERHEDGE AT BREACH OF 2345, GTC, FOR ALL FUNDS
robert.p.balanModeratorLeaderOwnerMar 12, 2021 10:47 AM
robert.p.balanModeratorLeaderOwnerMar 12, 2021 10:48 AM
Good haul for the week - $2.68 million. Lets do it again next week!
Doing real-time validation of the models performed very well these past two weeks, since the start of the March month ($5,171,370 so far, 13 trades, no loss, 3 breakevens). Knock on wood.
Models suggest that we are topping out this weeks, but real-time technicals remain positive, and so we will continue to run long equity trades, until we get confirmation of a top from real time analysis. The FOMC meeting next Wednesday, March 17, may be pivotal, however. We will be out of the market by Tuesday, March 16.
RM13Mar 12, 2021 2:23 PM
SPY at 100%, QQQ at 80%, bullish delta neutral report..
sparketMar 12, 2021 12:37 PM
robert.p.balan last year the MOTUs exacerbated the sell off to force the fed to release the bazookas. What is your opinion on this yield surge- could MOTU’s be up to the same sneaky business ahead of the Mar 17 meeting?
robert.p.balanModeratorLeaderOwnerMar 12, 2021 2:34 PM
sparket -- very perceptive -- yes, but this time, it is not more QE .. it is the SLR. They want that BIS mandated regulation out.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 2:42 PM
The 10yr yield has gone higher than I expected -- I will wait a while before triggering long TNs.
New higher high in yield -- not very encouraging for long TNs at the moment.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 4:12 PM
PAM BUYS 288 SCALPER CONTRACTS OF YMM1 AT BREACH OF 32510, GTC
*This order was filled.*
*YMM1 - DONE AT 32,513 BOUGHT 288 YMM1 SCALPERS FOR ALL FUNDS- *
Value sector perking up with rise in rates.
robert.p.balanModeratorLeaderOwnerMar 12, 2021 5:33 PM
PAM BUYS 300 CONTRACTS OF RTYM1 AS OVERHEDGE AT BREACH OF 2345, GTC,
*This order was filled.*
*RTYM1 -- DONE AT 2345.25 BOUGHT 300 CONTRACTS RTYM1 AS OVERHEDGE, FOR ALL FUNDS. *
flamarkMar 12, 2021 4:50 PM
Robert, With future equity/rate correlations unclear, I've noticed RTY (Top Line) seems to react positively to lower rates and has less neg reaction to higher rates. Best performance in both environments relative to the other futures. YM obviously does well especially with higher rates.
robert.p.balanModeratorLeaderMar 12, 2021 5:04 PM
YM and RTY now perking up with rise in rates, as should be. Positive covariance coming back- Hence NQ is doing poorly.
RM13Mar 12, 2021 5:30 PM
So are primary dealers buying or not buying treasuries ?
Even The Banks Are Bailing Now: Dealers Dump Record Amount Of Treasurys
The latest weekly data (ending March 3), showed that the primary dealer holdings data revealed a record $64.7Bn decline in Treasury holdings to $185.8 bn!
robert.p.balan ModeratorLeader Mar 12, 2021 5:52 PM
Its old data, Rafa. Read the post of gwizz1 earlier
RM13Mar 12, 2021 6:41 PM
Very good, thanks.
TimK123Mar 12, 2021 6:28 PM
ES supported?:
centexlifeMar 12, 2021 6:29 PM
Dark Pool purchase 500,000 Spy at $392.63 cost $196.31mm at 12:16 PM EST
TimK123Mar 12, 2021 6:32 PM
RTY looking positive too!
rp7640Mar 12, 2021 7:10 PM
rp7640Mar 12, 2021 7:10 PM
TimK123 maybe NQ is not going wedge direction..?
TimK123Mar 12, 2021 7:42 PM
It's possible NQ is in a parallel channel too, a not a wedge which seems totally the case before to me, (or it might be just mimicking being in a channel for the moment, might not hold as support), I don't get the structure though, to make that work it appears that W1 had some throwover (which would be very out of the ordinary indeed), it could have been a flat correction I suppose so the true start point was the circled dip. The other indices seem clearer to me at the moment. Well spotted though! Also NQ seems really weak, so if ES is expected to hit its top of channel around 3980 that could still leave NQ miles away and no hope of catching up. Never say never though, stranger things have happened in the indices recently, I'm sure NQ managed to make up a massive deficit overnight one day this week to the other indices while no one was watching..
flamarkMar 12, 2021 8:30 PM
FYI- Russell confused between regimes.. wants to hang with YM and not the others..
kizunoMar 12, 2021 8:33 PM
10yr interest 2021 YTD Mar 12 2021
kizunoMar 12, 2021 8:34 PM
Can't recall if someone has posted this, but my channel take on the 10yr since early Jan.
robert.p.balan ModeratorLeader Mar 12, 2021 5:52 PM
Have a nice weekend everyone. I will see you in Asian trading Monday.
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