The Fuss Around The 10-Year Treasury Yield

2018-04-27 | Simpler Trading Team

Most of the water cooler talk the past few days has been about the potential doom that may be just around the corner. Are we headed for another recession? Are we looking down the barrel of a loaded gun? What do I do with my trades?

All valid questions considering the 10-year Treasury hit 3% this week – a feat it hasn’t reached in more than four years. As of yesterday morning it sat around 2.998%. And like all potential bombs in the investment world, when one is close to exploding, it’s pretty much the only thing you hear about for the next several days.

With this bomb in particular, it has the potential to reach far and wide. The 10-year yield has hold on auto loans and home mortgages, just to name a couple. If this affects interest rates, and they climb higher, then investors fear inflation may be on the horizon.

Traditionally, when interest rates rise, stocks fall. The stocks have already fallen. And if you’re a trader, then being on the wrong side of a skydiving stock, is never in your best interest. This begs the question if the market sell off from February priced in this rise in interest rates, or will we see more downside? If so, how should you be playing the market?

There of course is a safe bet right off the bat. Play what you know, and play it well. Depending on your trading style, this yield doesn’t have to spell d-o-o-m. That’s how Henry Gambell and Danielle Shay see it. It’s not going to alter how they look at trades going forward. This means keeping an eye on key, major levels in the S&P futures.

But not everyone can trade without being affected by the news. We all have different trading personalities, and there’s always fear and the psychology that follows closely behind. So if you find yourself barely above water with this yield, grab an oxygen tank and read on.

There’s this fear of the perfect storm. Right now, the S&P has held the 200 period simple moving average and major .618 retracement level to the down side. This means there could actually be a bounce, and not a continued spiral downwards. Danielle is keeping an eye on a possible bounce at this low.

In the overall market, there’s plenty of consolidation. It looks to break one way or the other, but we can only know this by looking at it from one decision to the next. We are traders, not investors. Keep in mind, one of the perks of trading options, is that even when the market takes a tumble, you can still make money. Being proactive is important, but keep an eye on how things play out day-to-day.

Finally, an important thing to remember is many times a sell-off comes from fear – fear of the unknown. So if you want to ride this one out with us to wait and see if it continues to avalanche downward or bounce up, consider joining up with an Options trial membership today.