Using Treasuries As A Shadow Chart

As the market bottomed weeks ago, so did ProShares UltraShort 20+ Year Treasury (TBT). Coincidentally, the same day the markets bottomed, so did TBT. Treasuries have continued to sell off, which seemingly has helped fuel this recent rally. When TBT pulls back, the markets have followed suit. When TBT starts to rise (treasuries being sold), the markets start to rise as well. With this being said, I have started using TBT as my shadow chart during the day. This is giving me an extra indicator on where the market may be moving, before it does. If TBT starts to sell-off, I tighten up my day trade stops and when TBT looks to be acting bullish, I can feel more confident pressing my longs. With TBT selling off strong all day, the markets followed and took a dive into the close then continued into the after-hours.

I don’t expect this trend will last forever, I simply believe it is working in the short-term, so I will stick with it. TBT can continue to sell-off, but because so many bulls are anxious to join after they missed the recent rally, they will probably create an additional support level that could see TBT falling and the markets finally not following. That may be when the correlation between the markets and TBT is no more. In the meantime, consider using it to improve your day trading speed and efficiency.

Obviously, you can use ProShares Short 20+ Year Treasury (TBF) since TBT is a 200% inverse while TBF is 100% inverse. I personally prefer to use TBT because the moves are more easily identifiable as a shadow chart. It’s all about personal preference though.

Mike

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