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ICT Mentorship Core Content - Month 05 - Using 10 Year Notes In HTF Analysis
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ICT Mentorship Core Content - Month 05 - Using 10 Year Notes In HTF Analysis

Lesson 2.1: Using 10-Year Yields in Higher Time Frame Analysis

In this lesson, we will be discussing the use of 10-year yields in higher time frame analysis. We will explore the seasonal tendencies of the 10-year treasury note and its impact on the market.

Seasonal Tendency of 10-Year Treasury Note

  • The seasonal tendency chart shows two dominant cycles for the 10-year treasury note: a bearish trend in the first half of the year and a bullish trend in the second half.
  • Understanding these seasonal tendencies can help us identify when they influence or contradict market performance.

Charting and Notes

  • When charting 10-year treasury prices or futures contracts, we use barchart.com.
  • For charting 10-year treasury yields, we use investing.com.
  • Treasury prices are inversely related to yields. As prices drop, yields increase, and vice versa.
  • Long-term funds seek yield, meaning they allocate investments where they can achieve higher returns.

Relationship with Dollar Index

  • The dollar index tends to rally when yields increase (treasury prices drop) and decline when yields decrease (treasury prices rise).
  • Understanding this relationship helps us analyze quarterly shifts in the marketplace.

Seasonal Tendencies Comparison

  • The seasonal tendency for the dollar index shows a rally in January/February and a decline from June to October/November.
  • These trends align with the bearish tone for the dollar index during mid-June to July as seen in the seasonal tendency of the 10-year treasury note.

Inverted Relationship between Treasury Notes and Dollar Index

  • When treasury note prices rally (yields decrease), it indicates dropping interest rates. This discourages yield-seeking traders from buying dollar-based assets.
  • The inverse relationship between treasury notes and the dollar index creates an adverse effect on their performance.

Example: September 2015 Contract

  • Analyzing the September 2015 contract of the 10-year treasury note, we observe a rally in prices (yield decrease) during June, indicating a bearish trend for the dollar index.

By understanding the seasonal tendencies and relationships between treasury notes and the dollar index, we can gain insights into market trends and make informed trading decisions.

New Section

This section discusses the relationship between the September contract of treasury notes and the dollar index, indicating a likelihood of a large consolidation rather than a trending environment.

Treasury Notes and Dollar Index Relationship

  • The September contract of treasury notes and the dollar index were rallying together, suggesting they are moving in tandem.
  • When treasury notes and the dollar index move in tandem, it indicates a high probability of being in a large consolidation phase rather than a trending environment.
  • Previous highs and lows should be monitored to identify potential violations and determine the middle range of the consolidation.

New Section

This section explains how the movement of treasury notes and the dollar index affects foreign currencies, highlighting long-term consolidations and directional trends.

Impact on Foreign Currencies

  • When both treasury notes and the dollar index are in consolidation or moving in their seasonal tendencies, it creates long-term indecisiveness.
  • In such cases, there is a low likelihood of continued directional trades for either treasury notes or the dollar index.
  • Foreign currencies also enter into long-term consolidations due to the consolidation of both treasury notes and the dollar index.
  • However, when there is alignment between seasonal tendencies in treasury notes and supporting movements in the dollar index, there is a strong probability of a directional long-term trend.
  • Large funds tend to invest during these periods for extended one-directional bias moves.

New Section

This section focuses on analyzing price action in 10-year treasury notes using seasonal tendencies as indicators for future market movements.

Seasonal Tendency Analysis

  • The March contract of 10-year treasury notes for 2017 is examined to demonstrate price action from late 2016 to present trading days.
  • The seasonal tendency for this contract shows that November typically marks a high point.
  • The election results in November 2016 influenced the market, leading to a high in the March contract.
  • After reaching the seasonal high, treasury notes started trading lower, indicating a downtrend.

New Section

This section discusses how the movement of treasury notes and the dollar index can have opposite effects on each other and create trending environments.

Treasury Notes and Dollar Index Relationship

  • As treasury notes enter a downtrend due to seasonal tendencies, there is an opportunity for the dollar index to move in the opposite direction.
  • A sell-off in treasury notes leads to an increase in interest rates, attracting buyers seeking yield by buying the dollar index.
  • This creates a trending environment for the dollar index, with short-term lows and highs observed during this period.

New Section

This section emphasizes that studying price action in 10-year treasury notes provides insights into market consolidations and their impact on currency pairs.

Impact on Currency Pairs

  • The consolidation observed in 10-year treasury notes and its relationship with the dollar index affects various currency pairs such as British pound and euro-dollar.
  • These currency pairs experienced significant consolidations throughout mid-2016 due to alignment with movements in both treasury notes and the dollar index.

New Section

In this section, the speaker discusses the importance of timing trades based on the seasonal tendency of the 10-year treasury notes and its impact on trending markets.

Timing Trades Based on Seasonal Tendency

  • When looking for explosive and trending trades, it is helpful to consider the seasonal tendency of the 10-year treasury notes.
  • If the seasonal tendency is in effect and supported by contrary price action in the dollar index, it indicates a potentially explosive and trending trade opportunity.
  • However, if these conditions are not present, it suggests a range-bound consolidation period where short-term moves should be focused on.
  • During range-bound periods, short-term and day trades have higher probability while long-term position trades are less favorable.

New Section

This section emphasizes that long-term position trades are favorable when both 10-year treasury notes and dollar index are in trending environments or when there is an absence of seasonal tendencies.

Favorable Conditions for Long-Term Position Trades

  • Long-term position trades are favorable when both 10-year treasury notes and dollar index are moving in trending environments.
  • The absence of seasonal tendencies, particularly a strong buy signal for 10-year treasury notes around June-July, also supports long-term position trades.
  • However, it's important to note that just because there is a strong buy signal during June-July doesn't mean that it will always be the case. Market conditions can vary.

New Section

This section highlights the possibility of being a bearish trader for 10-year treasury notes and mentions specific high points to focus on.

Bearish Trading Approach

  • It is possible to primarily focus on being a bearish trader for 10-year treasury notes.
  • In this scenario, November high is indicated as a potential target.
  • This aligns with the seasonal tendency for the 10-year treasury notes and also coincides with the 2024 election.

The transcript provided does not include specific timestamps for each bullet point. Please ensure to associate the correct timestamps when creating the final markdown file.

Playlists: 2017 ICT Private Mentorship Core Content Month 05
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