Earlier this month I wrote a post Bumpy road ahead. Short term traders probably think what a foolish call that was, because the stock market went nowhere but up since then. While the intention of the post was not to call the top, it was to warn you that volatility could pick up. Riding up trends in low volatility environment is nice, and while calling tops is not sensible, we must ensure we not become complacent. Easy times can last longer than most anticipate, but they can be escorted by volatile moments too.

You might want to try to play heightened volatility by buying puts or by executing some other options strategy, shorting stocks, or by doing something else. However, I think the best risk reward opportunity right now is to be long bonds.

I like almost any bond contract, however how the market is acting currently the longer the maturity the better. Let’s start with a chart of Ultra T-Bond Futures, a contract with maturity of at least 25 years. If you can’t trade futures, a good proxy is ETF $TLT.

The price is breaking out of a tight consolidation. If the price can hold above 193 I think it’s a good chance we see higher, much higher, prices quite soon. And, as mentioned in post Bumpy road ahead, I like gold too. If we’re above 1580, there’s no reason not to be long.

What do you think, should we rather be selling these?

ChartingTrades.com is a blog of CT Capital Ltd.

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