Treasury Bond Put Options As An Intermarket Gauge by Joe Duarte
Here, "Wall Street Detective" editor Joe Duarte discusses using the Hines ratio, a sentiment indicator based on options activity, on the Treasury bond futures market as a trading tool for bonds and currencies.
The compared value of one country's currency to that of another reflects the perceptions of market participants. Currency traders closely follow each country's currency relationships, interest rates, politics and economic climate. The primary focus for traders is the interest rate climate of each country, but the other elements involved can dominate traders' perceptions. As each of these components change, traders reposition themselves for new trends in currency prices.
Because interest rate trends are such an important component in currency trends, I decided to apply technical analysis to the US bond market as a tool for trading currencies. I discovered that if the tools begin to fail, then this may indicate a change in the fundamentals driving the market. What follows is an example of a technical indicator that failed, and therefore alerted traders to a change in the fundamentals.