How to Trade the Fed Pivot: Short-Term Fed Cut Playbook

  <li><strong>Entry (3 actionable setups):</strong>
    <ol>
      <li><em>Yield mean-reversion trade (short duration):</em> When 10y yield spikes >0.25% intra-session and closes above upper bollinger(20,2) on 15m, enter a fade: sell a yield spike with stop at the session high + 10bp, target 50% retrace. Size: 0.5–1% risk equivalent in bond futures or TLT options.</li>
      <li><em>Cyclical momentum play (banks, industrials):</em> On a daily close above prior 5-day consolidation + volume >20-day average, enter 50% position. Stop: daily close below the consolidation low (invalidates structure). Targets: 1R at prior swing high, add half size to ride to 2R.</li>
      <li><em>AI/long-duration protective hedge:</em> If you hold long-duration AI names (e.g., NVDA, ANET), buy 2–4-week put protection sized to 25–50% of position value when implied vol > historical vol by +40% and the Russell 2000/QQQ divergence >1% intraday.</li>
    </ol>
  </li>

  <li><strong>Stop / Invalidation:</strong> Use structure-based invalidations: for intraday yield fades, stop = session high + 10bp. For daily momentum longs, stop = daily close below consolidation low (typically 1.0–2.5% depending on name). Risk per trade: 0.5–1% of account equity (strict).</li>

  <li><strong>Targets & Sizing:</strong> Ladder targets: 1R (take partial profit), move stop to breakeven, then trail to 2R. Suggested R/R: initial target 1:1, stretch to 1:2 if momentum confirms. Volatility-adjust size by ATR(14) — bigger ATR = smaller size.</li>

  <li><strong>Management:</strong> Timebox trades around macro windows. Avoid initiating new directional positions 60 minutes before major data (employment, CPI) or Fed remarks. Use 30–60 minute time stops on intraday yield plays if no mean reversion occurs.</li>
</ol>

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<table>
  <thead><tr><th>Signal</th><th>Interpretation</th></tr></thead>
  <tbody>
    <tr><td>10y yield break above BB(20,2)+ATR surge</td><td>Short-term risk-off spike — candidate for mean-reversion fade</td></tr>
    <tr><td>Daily close >5-day consolidation + vol >20d avg</td><td>Momentum continuation — add with structured stops</td></tr>
  </tbody>
</table>