A performance check of the old reliable XLF/TLT pair trade reveals some disturbing discrepancies between trade signals and subsequent price action.The steady slope of the equity curve that has endured for 6 months has now hit a bumpy patch, with several recent losing trades that did not violate the N day time limit…the risk parameter that has previously been easily identified as the culprit in losing trades.
Bonds vs. the VIX are completely out of sync also in today’s action. Recent major news articles have profiled a number of “smartest guys in the room” like Buffett, Rosenberg and Hunt, who have diametrically opposing views of long term treasuries and that may be part of today’s wild gyrations although it does not explain the XLF/TLT disconnect over the past 2 months. Best to stand back on this set up until the equity curve straightens out, IMHO.
