With the 5/29 and 6/9 posts on the bond, I indicated there could be
a good short term long side countertrend tade in the offing reflecting
a steep yield premium to the 200 day moving average and "too many
bears" among trading advisors. Well, there was a good 6 point (in
price) leveraged trade there, but it turned out to come in well below
expectations. With the recent weakness in the price of the bond, the
yield is again at a substantial premium to the 200 m/a, with this
implying a sharply oversold market. Bearish sentiment has abated,
and this weakens the logic for a long side trade. Even so, there has
just this week been a small shift in trader psychology away from being
long industrial commodities. So, this keeps the bond interesting and
in play as a candidate for re-placing the trade. Since traders are
now a little concerned about whether cyclical risk exposure is ahead
of the fundamentals, the bond could get another play. However, this
would be a trend / momentum call with odds of getting the best
price low.
30 year Treasury yield.
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