I have always liked the idea of trading a reaction rather than action. For example, if the BOJ commits to a policy to weakening the yen, then Japanese equities will surge. But if the BOJ has a hawkish surprise, then your short yen and long Nikkei trade burns you badly. But lets say after the Yen has devalued, and nothing else changes, then I would expect Korea to be forced to devalue as well, so you can short Korean Won as a “reaction” to Yen devaluation.
GLD/TLT is an extension of that idea. I have no idea whether the Fed will be dovish or hawkish in the future - and neither do the Fed governors. I have long given up expecting logic or consistency from central banks. But in a “pro-labour” environment, if central bank policy is loose (proxied by TLT here) then gold should do well. And if central bank policy is tight, the gold should do badly (or more likely flat). GLD/TLT is on the cusp of breaking out.
All of that has been driven by a move in gold
Harry Hindsight would say to me I should have not bothered with the TLT short - but I lost count of the clients who used to trade over the top of my positions, would ditch hedges and then tell me how much money they lost. The offsetting position is there for a reason. The fact is that the Federal Reserve cut rates by 50bps, and the US 2 year Treasury seems to indicate more cuts to come.
While gold is at new highs, digital gold - bitcoin - is loitering at levels first seen in 2021.
Should we expect a move in bitcoin? Well I always thought the action and reaction in crypto space happened in the stable coin area. If you start seeing an increase in money in stable coins, then the likelihood of a surge in bitcoin and other crypto goes up.
