April 2nd, 2024

Rates matter again. 10 YR Yields are hitting highs for the year, and just like that, rates are back in focus. As traders, we must understand that sometimes certain factors truly impact the market while others do not. It’s our responsibility to recognize when things matter and adapt accordingly. Currently, the market is fixated on higher rates, driving market activity.

How does this affect us as day traders with short-term strategies?

It impacts us because we need to monitor rate movements before entering the indexes. If ZN is selling off, the indexes are more likely to follow suit, and vice versa if ZN is rallying. For instance, if ZN is at lows and we receive a buy signal in RTY or ES, it’s unlikely the RTY long trade will succeed without a ZN bounce. The bounce in ZN would confirm a potential RTY or ES bounce. I didn’t mention NQ because it’s less responsive to rate increases, but it may still react similarly due to the current focus on rates.

Today, I’ll be closely watching the 10 YR (ZN) action as a leading indicator for ES and RTY movements. If ZN continues to decline, I will focus on short selling in RTY and ES. If ZN starts to bounce, I’ll explore long opportunities in ES and RTY. NQ is currently trading in a two-way pattern, and I don’t favor either side at the moment.

Interestingly, the rise in rates isn’t affecting Gold. Normally, Gold struggles in a higher rate environment as the Dollar tends to strengthen. However, this isn’t the case currently. Although I’m not a macro expert, I find this situation intriguing and will monitor it closely in the coming days. Trading appears to be getting interesting again just when we thought volatility was diminishing in the market.

Stay nimble and stay sharp. (charts today are just daily candles showing the action in 10 YR Yields vs Indexes)

Cheers, DELI