Hi everyone. JD here with your Rational Trader market analysis.
In today’s video…
Arbitrage Comes in All Shapes and Sizes
One of the core principles of Rational Trading is the belief that markets are inefficient — and that mis-pricings open the door to short-term trading opportunities.
That’s what today was all about.
Moving Averages Showed Me the Divergence
First thing this morning, I saw the NASDAQ trading well above its 200-day moving average — up nearly 1,000 points beyond it, actually. That’s a healthy bull run, but not a place where you’re likely to find an edge.
Then I pulled up the Russell 2000, and it was a totally different story:
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Above its 50-day moving average
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Still below the 200-day
That kind of chart doesn’t scream “strong trend”… but it does suggest an arbitrage might be hiding in plain sight.
Bond Market vs. PPI: Something Didn’t Add Up
Then came the kicker:
PPI came in way below expectations — a true deflationary bomb.
You’d expect the bond market to react sharply. But instead, the 10-year Treasury yield barely budged — dropping from 4.51% to just 4.49%.
That was way too muted, and a clear sign of inefficiency in the yield curve.
(Translation: Lower interest rates typically boost small-cap stocks — and the bond market wasn’t reacting as it should have.)
So I had:
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A bullish technical structure in the Russell
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A misfiring bond market
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A deflationary surprise
That’s a green light for small caps.
The Trade: Wait, Confirm, Strike
I watched the IWM ETF closely. At first, futures suggested it would open lower — but that pricing quickly faded.
I waited.
Then, just before the top of the hour, the move materialized.
I entered IWM at $206.08 and exited at $207.29 — a 60 basis point win.
(A basis point is 1/100th of a percent, so 60 bps = 0.6% gain.)
The key? I didn’t force it. I waited for the story to align.
Final Word: This Is Why I Built the Four Pillars
Today was a reminder of how the Four Pillars of Rational Trading help me triangulate opportunity from noise:
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Moving averages told me where strength was hiding
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The yield curve showed me a disconnect
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And the trade setup played out — just a little later than expected
That’s how you trade rationally.
Talk soon,
JD
The Rational Trader
P.S. Watch how my new indicator is spotting stocks Wall Street wants to own — before they pile in!
