QQQ/Bond Yields/Gold

 

Trader Scott’s Market Blog

December 1, 2016

First of all, for those of you who shorted QQQ two days ago into the re-test, you have a very good trade going, but remember to take at least partial profits. This is not a “call” on where it’s headed, it’s purely about how to survive markets (trading skills). As for bonds, last December my belief was the bear market in shorter term Treasuries would continue (shorter term yields continuing to move higher). But longer term rates would continue to lag the rise in shorter term rates, therefore we would see a flattening yield curve (short term rates moving higher while long term rates stay flat or fall). That is generally what happened, but I also believed that flattening yield curve would continue into 2017 when long term bond yields would then explode higher (thus a steepening yield curve). Meaning the long term bond yields would finally join the short term yields in a multi-decade bear market in bonds. (The short term bond yields actually started their bear market in 2011, when they hit their lowest low yields in around 30 years.) Well the long term bond yields have certainly exploded higher. However they certainly did not wait for 2017 to do that. While this doesn’t change my long term view whatsoever, it does alter my view about when those higher yields of resistance would be reached. And as shown on the annotated chart, the first really big resistance area is a bit over 3% on the ten year yield, and the next area is about 4%. As also shown on the chart, I believe this area above 2.4% is (for a trade) an excellent area to buy bonds, as we’ve finally seen a selling climax following the preliminary ending action from last week. And the sentiment on bonds is awful. There will be some re-testing, but it certainly is an entry point to leg in. However this is definitely not an investment for me, as I believe we’ll be taking a shot at 3.05% later next year. And for anyone looking for a mortgage, on the next rally in bonds (lower yields), seriously consider where we’re headed – and use timing markets in your favor.

As to gold, there were more new lows in gold today, but the strong hands are continuing to accumulate. This area won’t be easy, but use the volatility to your advantage.

About

img_0074bwcrsmTrader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.



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'Trader Scott’s Market Blog – QQQ/Bond Yields/Gold – December 1, 2016' have 6 comments

  1. December 3, 2016 @ 3:51 pm David V.

    Is it go long the dollar here Scott (not that I’m
    competent to trade forex) just curious as to the influence on the market action going fotward.

    Reply

    • December 3, 2016 @ 4:26 pm traderscott

      On a very short term trade basis, one more push lower could set up a decent entry point. But currently I’m not too excited about that trade. As you know David, I’ve been long the $ for several years, and I’m still quite bullish. But the chinks in the armor keep adding up. And the continued $ strength will eventually be its’ own demise. So here and now, one more quick push up in the $ above 102.50 has the potential to set up a short sale/hedge for a trade only. And as for a longer term basis, some of the pure trend following systems might prefer buying the “breakout” in the $. But it isn’t my approach, as I only put new money down when most everyone is bearish (including myself sometimes).

      Reply

  2. April 8, 2017 @ 4:00 pm Bonds Are a Good Buy, or Maybe Not

    […] the weak hands had record short positions. This was all chronicled in some posts at the time like this one when a very good opportunity had arisen for me to take the other side and go long. It was just an […]

    Reply

  3. April 12, 2017 @ 9:00 pm Train Yourself to Think Dynamically, Forget Thinking Statically/Video

    […] Is this the time to buy bonds. Absolutely not. But when I bought bonds (TLT) on 12/1/16 and wrote about it here, the whole world was yelling about a bond market collapse. It was truly amazing to witness. The […]

    Reply

  4. April 18, 2017 @ 10:30 pm The Bond Market Has Silenced The Idiots

    […] the “bond market crash”, right at the price lows. But on December 1st, 2016, I did this post saying I’m buying bonds (and covering a profitable short in QQQ). So now they’re […]

    Reply

  5. June 19, 2017 @ 12:30 am Weekend Outlook Video

    […] beautiful bond rally from the December 2016 lows. There are several posts from early December about my bullishness on bonds and why I was buying. That selling climax setup in bonds was textbook, with the incompetent […]

    Reply


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