Inflation cools and Fed rate hikes fade — load up on long-term bonds

Verdict: The thesis and the trade point in opposite directions — wait for the levels

**Read this first:** This idea has a split personality. The headline thesis argues for loading up on long-term bonds after the cool July 14 CPI print (per Bloomberg: prices fell for the first time since 2020, cutting July Fed hike odds to 20%), but the compiled, live rule set is a confirmed *rally-fade* — it enters short TLT when price is above its 50-day EMA ($83.37), RSI is between 55 and 70, and MACD has crossed above its signal. As of the September 3 data, none of those conditions is close: TLT sits at $82.27 with RSI at 45.6. The strongest point for the trade is that the backtest works recently — 60% win rate and +3.3% return with a 1.7% drawdown over the last 24 months. The strongest point against is that the news flow has turned squarely against the long-bond thesis: Fed official Logan called for modestly higher rates (Reuters, July 16), and a legendary bond bull abandoned a three-decade stance on inflation concerns (MarketWatch, July 17). What flips the verdict: a TLT daily close above roughly $83.37 with RSI above 55 and MACD turning — or a hawkish next CPI print that makes the whole thesis stale. Until then, patience beats urgency.

Trade now: no trigger yet — the fade is still waiting on TLT momentum

There is nothing to execute today. The live entry conditions on TLT (daily) are not met: TLT last closed at $82.27, still $1.10 below its 50-day EMA of $83.37 — the rule needs price above that line. RSI (14) sits at 45.6, well short of the required level above 55, though it comfortably satisfies the upper bound of below 70. The MACD line remains below its signal line, so the momentum confirmation is also absent. Until TLT reclaims its trend line and RSI pushes through 55 with MACD turning, the correct action is to stand aside and let the market come to you. When the setup does trigger, the risk plan is already defined by the rules: a hard 2% stop loss against a 4% take profit, plus a 30-session maximum hold, a momentum-reversal exit if MACD crosses back above its signal, and resistance-based invalidation near the second resistance level at $84.86. The reward-to-risk envelope is therefore fixed at 2-to-1 on any triggered trade, with position sizing capped at 25% of the account and sized off a 2% risk budget. The completed backtest supports patience rather than urgency. Over five years of daily TLT data the rules produced 44 trades with a 45.5% win rate and a +2.0% net return, with a maximum drawdown of 3.1%; the strongest two-year window ran 15 trades at a 60% win rate for a +3.3% return with only a 1.7% drawdown. Those are modest but steady profiles — exactly the kind of setup that punishes forcing entries before the conditions line up. Wait concretely: check the daily close, and only act on the day TLT closes above roughly $83.37 with RSI above 55 and MACD above its signal. On tuning: a bounded walk-forward test of four parameter variants found that none improved on the frozen baseline by the required margin in the untouched final 12-month holdout, so the published rules stay as configured — no robust alternative setup was established.

The disinflation trade has the macro tape behind it — and the recent windows agree

The idea's macro core is genuinely well-sourced. Per the Bloomberg report of July 14, US consumer prices fell for the first time since 2020, and the same day Bloomberg noted treasuries rallied as July Fed hike odds were cut to 20%. The July 15 follow-up extended the case: bonds rallied further as producer prices reinforced the disinflation read. That is the exact mechanism the thesis names — cool inflation → fading hike expectations → rising fixed-income prices — and it played out in real time on consecutive days. The backtest evidence supports at least the short-to-medium horizon of the idea. Over the most recent 24-month window on TLT daily bars, the rule set produced a 3.3% return across 15 trades with a 60% win rate and a maximum drawdown of 1.7%. The 12-month window was also positive: a 0.4% return on 6 trades with a 1.5% maximum drawdown. So in the period most relevant to the current disinflation narrative, the strategy made money with contained downside — the freshest evidence is directionally consistent with the thesis. Even the full 60-month window, while the weakest,…

Scores

• Conviction score breakdown: 42
• Thesis support: 40
• Trade readiness: 25
• Risk quality: 60
• Backtest evidence: 55
• Fundamentals trend: 30

Watch items

• TLT — RSI (14)
• TLT — Close vs 50-day EMA
• TLT — MACD (12,26,9) vs signal line
• TLT — Nearest resistance level
• TLT — Next CPI release
• AGG — Next monthly dividend ex-date
• AGG — Price above EMA (50)
• AGG — RSI (14) above 55
• AGG — RSI (14) below 70
• AGG — MACD (12,26,9) above MACD (12,26,9)
• AGG — MACD (12,26,9) crossed above MACD (12,26,9)
• TLT — Price above EMA (50)
• TLT — RSI (14) above 55
• TLT — RSI (14) below 70