This indicator takes advantage of the fact that when the 10 and 5 year Treasury Constant Maturity Minus Federal Funds rates (T10YFF/T5YFF) go down sharply, investors tend to rotate into stocks. This arbitrage works great for growth stocks, since growth stocks are higher beta by virtue of their lower market cap and more speculative nature in general. This script identifies the moving-average convergence/divergence of the average of the 10y and 5y treasury rates and then finds the variance of that macd line. By averaging that variance with the macdline's inverse, an analog output of treasury -> stock rotation can be identified. The upper and lower thresholds bring buy and sell windows into focus.
How does this script work extremely well when i apply it to any Forex Pair? Currently using it to determine ranging and breakouts levels. Also how can i invert this script? a bit confusing when making quick decisions
jamiesonpa
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@obstak, The yields on Treasuries often set the benchmark for interest rates around the world. When the yields on Treasuries rise, it can make the US dollar more attractive to investors because they can get a higher return on their investment. This can cause the dollar to strengthen relative to other currencies, impacting forex trading pairs.
obstak
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@jamiesonpa, Awesome work, Great Indicator, Cheers!