Who you going to Follow ?

If you are looking for clues to help you be early in the new market direction, I believe that what is happening the past two days in the 30-02 YC and probably more importantly the yield on the 2 YR is pivotal.

One might want to ask the question, who you want to follow, and the 2 year yield has proven to be the one that shows the core direction of interest rates the earliest and best. There is probably one main reason, and that is that the 2 year is, of the major rates to follow, the closest to the rate the FED controls, the FED Funds Rate. The other rates are less solid and more a guess.

Here is a chart going back to what I call the January 26 Economic Fracture Date, which shows the percentage change from that date for SPX, the 30Y, the 10Y, and the 2Y. This clearly indicates that the 2Y has been the driver.

And Just to be clear…

I have been trading for 54 years, 2 years as a cattle feedlot hedger (where I got the bug), 10 years as a CME floor trader (starting out in cattle and then expanding to currencies and interest rates as the CME adopted them) plus writing a company market letter for clients, 25 years as an upstairs trader in Chicago, and 17 years as a retired trader (14 of which I have posted comments on this website).

During all this time I cannot remember a trade where I got in late, must have been a few. But my method always seems to get me in early on major moves, sometimes painfully early. but that is who I am. I don’t try to start out by assessing who is long and short, but in retrospect, I do seem to end up opposite the big money in the early stages of a major move, and I have to say that my efforts to ride the coat tails of big money have been an ongoing quest, but I always diverge painfully to early.

Thanks for following this site,

Donald Knepp