From late June we have had a plan for trading the UK. Those readers who have adhered to this general guidance have done reasonably well, bottom line; nothing spectacular, but better than a stick in the eye.
Key of course is that under no circumstances were traders to look to sell (S-L) the term structure, only for the opportunity to own it. Because 1) we expected additional Bk of England firing, because 2) we expected further flight to sanctuary (E-Z) and because 3) we knew that most models had excessive weakness built in, this seemed an opportunity (and there haven’t been many of those around lately).
Thus, traders were to own this spread at or near 270 (2-30) on June/27. We made it clear then that this was not a directional strategy, then 0.29 – 2.99%. The spread expanded nicely into early July (285), then fell back to 270 mid July. Again, readers were instructed to get long if not already long. That has worked satisfactorily, last 297, or .12 – 3.09%, this writing.
We were of course gifted today by both the July PPI and Industrial Output prints. The spread may come in a tad from today’s spurt, considering something less than expected from the US NFP read.
Realize some profits at his juncture but maintain a balance.
Naturally there are many ways to put our insight to use, not simply the ratio spread. But key is to be cognizant of this overriding reality into year end.
Keep it simple.
Robert Craven
Key of course is that under no circumstances were traders to look to sell (S-L) the term structure, only for the opportunity to own it. Because 1) we expected additional Bk of England firing, because 2) we expected further flight to sanctuary (E-Z) and because 3) we knew that most models had excessive weakness built in, this seemed an opportunity (and there haven’t been many of those around lately).
Thus, traders were to own this spread at or near 270 (2-30) on June/27. We made it clear then that this was not a directional strategy, then 0.29 – 2.99%. The spread expanded nicely into early July (285), then fell back to 270 mid July. Again, readers were instructed to get long if not already long. That has worked satisfactorily, last 297, or .12 – 3.09%, this writing.
We were of course gifted today by both the July PPI and Industrial Output prints. The spread may come in a tad from today’s spurt, considering something less than expected from the US NFP read.
Realize some profits at his juncture but maintain a balance.
Naturally there are many ways to put our insight to use, not simply the ratio spread. But key is to be cognizant of this overriding reality into year end.
Keep it simple.
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