Ok guys hope everyone had a great weekend, now its back to the numbers. One of the things we try to do here at MTR is cut through the narrative. There is so much inundation via the 24/7 news and media outlets, that 99% of it is filler and garbage, unworthy of our time. This is why its important for independent researchers like us to gain an audience, because we DONT WANT YOU TO WASTE YOUR TIME. Look guys, on average we have about 65 summers, that’s it, its not a lot. By 65 summers we mean by the time you are 20, you only have about 65 more annuals left! Its really not a lot of time, SO DONT WASTE IT!
Honestly this is the big difference between people that get s#it done and those that don’t. They recognize how important it is, not to waste time. In fact, don’t waste anything, food, money, water, you name, it, conserve! We take so much for granted that quite often we lose sight of actual VALUE. So don’t fall for it, realize your potential and that you are worth so much more, in fact you owe it to yourself!
“Nosce Te Ipsum” which is Latin for Know Thyself.
We value this saying and its importance should not be overlooked. Your success will be driven by this whether you like it or not, you can try to create a facade, you can try to convince yourself you are something that your not, but ultimately all of it succumbs to the base reality of who you really are. We quite often correlate knowing thyself with “gut feelings” with “intuition” and there is some relevance in that, but honestly, just be yourself. We believe that by just being yourself you will open up many pathways, that life will flow so much more easy, that clarity will find its way to you. As investors or traders, this is a very key element to your success.
Why? Because traders and investors need to be both aggressive and humble and combining arrogance with restraint, is much easier said than done, not impossible, but relatively improbable for most. This is also true for any outright success in any industry we believe, this doesn’t mean we shouldn’t try uncomfortable things, in fact getting outside of your comfort zone and trying new things is paramount to knowing thyself! Anyway we just thought we would share this because it honestly is an important attribute to success in trading and in life.
Ok so as far as the big news, well there really isn’t much, and no we don’t care really about the Oval office incident with VZelensky, we don’t. What we do care more about though is the Atlanta FED GDP forecast which has done a massive about face going from +2.33% to its current -2.825%! What is the ATL FED seeing exactly? We know this is a mathematical model and mostly due to tariffs and the trade deficit but this is pretty significant:
No wonder the US Bond market has been on a tear lately with the long end up over 5% in the last month! We will take a better look at the bond market later, but for now the overall market tone is obviously adjusting the risk and taking a few pieces off the table. The first real dip has shown itself, but that doesn’t mean we don’t go and spend time with a back and fill trade. Unless we have a real catalyst, we would expect the consistent flurry of willing and able retail, fast money step in and take a shot at a rebound here. We suspect they will run into real sellers on any pops higher in equities but that won’t deter the efforts.
As far as earnings this week, we get a good picture of the consumer before the open tomorrow with Target, Best Buy and AutoZone and after the close a look at CrowdStrike which has had a decent 125% run since last July and the $400 level has given it some issues, a break of $400 would see this rollover in our opinion. On Thursday we have AVGO or Broadcom, who we just booted out of our MEGA8s and a look at CostCo as well.
As far as the Economic Calendar, we have ADP and ISM services on Wednesday, trade deficit on Thursday and the big NFPayrolls on Friday expecting 160k and 4.1% Unemployment rate.
Ok onto the markets now, we rolled the March fixed income futures to June from March. These are the quarterly futures expiration rolls and the ratio’s for our spreads, the ones we follow didn’t change. The CME Group puts out great data in regards to US bond market data, including all the DV01s which are paramount to defining hedge ratios:
When you look at the futures DV01s above you can use them to create your futures spreads, for instance if you wanted to trade the T-Bond (USM5) vs the 5Yr (FVM5) this is trading a $131.01 DV01 and a $41.27 DV01 so the correct ratio is [$131.01/41.27 = 3.17]. So what this means is that you would have to put on 3.17 FV for every 1 US.
This is the FOB spread and the CME Group offers them in spread format as shown below:
This stuff is for the more experienced trader, but you can certainly gain all the knowledge to track and define your risk if indeed you want to trade these products. We have traded them for decades and found that they are crucial in any sort of risk hedging, interest rate hedging and or spread trade dynamic whereby you are trying to capture or target a specific duration of the US yield curve.
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