The /ZB (30-yr Treasury bond futures) or TLT (20-30 yr T-bond ETF) long trade and/or QQQ short hedge trade idea from yesterday’s video broke out above the downtrend line today, triggering an objective long entry or add-on. 120-minute chart of /ZB followed by the 60-minute chart of TLT, with price targets, below.
ZB 120m May 14th
TLT 60m May 14th
As covered in yesterday’s video, Treasury bonds have inherently low volatility & gain/loss potential. As such, it was suggested to use a 3x position size (vs. QQQ or SPY) if using TLT as a hedge against a short on the stock market (also making the appropriate position size adjustment if trading futures contracts). As of now, QQQ is trading up just under 1% on the day with TLT +0.62%, thereby providing about a 1.9% beta-adjusted gain in the Treasury long, more than offsetting the 1% short position on a QQQ short today by a factor of nearly 2x, for anyone currently short & using that indirect hedging strategy.
Even if/when QQQ triggered the higher-probability sell signal I’ve been waiting for (a solid break & close below the uptrend line off the March 30th lows), I plan to leave the Treasury long hedge on due to the constuctive charts as well as the fact there’s a good chance we’ll see institutional rotation out of the “risk-on” tech stocks & indexes into the “risk-off” Treasury bonds. That’s assuming that the sell signal in QQQ comes soon AND TLT/ZB hasn’t hit the current final price targets, with their respective charts still looking constructive at the time.