Trade Global Slowdown: Real Rates & Shorting Developed Markets

Intermarket Analysis Throught Macro and Technical Methods

#26 Action: Set ups, Real Rates and Equity Markets.

Trading Real Rates around the world.

Intermarket analysis, once again, shows us the bigger picture. It’s no longer just about going short or long on a stock, a market, a bond, or a commodity. A global perspective lets you understand what’s happening and opens up options to choose a vehicle you might not have considered.

Real Rates, Nature, Its Lessons, and the Choice of Prey.

Whenever I can, I enjoy watching Animal Planet. It always amazes me to see a pride of lions hunting deer, zebras, buffaloes, giraffes, and even elephants. This perfect killing machine is constantly seeking the vehicle that will allow it to eat.

Despite their superior strength, they systematically seek weakness in their prey. From the largest to the smallest, the pride instinctively selects the weakest prey, whether due to illness, age, or size. Nature is wise and markets instinctively act in the same way.

Real Rates and Choosing the Right Vehicle.

Based on our macro view and inferences from the commodities market, we have been and are still looking for vehicles that allow us to trade a slowdown, not just in the U.S. but globally. We must carefully choose one or several targets.

Here’s the first one. We’re not trading it yet, but we’re watching closely.

ProShares Short MSCI EAFE (EFZ):

Objective: Inverse (-1x) of the MSCI EAFE Index.
Ticker: EFZ
Coverage: Targets developed markets in Europe, Asia, and Oceania, excluding the United States and Canada. This makes it a solid option for taking a bearish position on developed European and Asian markets.

Real Rates and Major Trend.

Real rates, Volume and Value zones

It’s overextended from a secondary value zone.

Real Rates and Momentum.

Real Rates and Mean Reversion.

Real Rates and Time.

Course of Action.
It depends on each trader’s time horizon. For swing trading (3-6 months), this asset is in the zone. Remember, this game is all about relativity—profits vs. losses. The ratio that allows for profitability is 2.5-3 to 1. Few traders truly understand this. The best traders in the world with active portfolios have a success rate of 50-55%, considering these ratios I mentioned. I’ve seen traders with an 80% hit rate lose capital because they enter too many trades that don’t meet the foundational P-L requirement. Without that, it’s better to go surfing.

Our Process

This is one of the setups under close watch. We’re working on several others, all consistent with our hypothesis.

For legal reasons, as you know: These are not suggestions; this is what we’re doing, shared publicly for marketing purposes. Do your own research!

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