Allow me to share just one simple ratio chart. It is the RYT divided by the IEF. That is, the S&P equally-weighted technology fund (RYT) divided by the 7-10 Year Treasury Bond fund.
Remarkable chart, isn’t it? Rarely have I seen such a well-defined ascending channel.
So let’s suppose that this long-term chart strongly suggests that RYT is overvalued compared to IEF, and that RYT is going to weaken and IEF is going to strengthen (which would, in turn, lead the ratio chart lower). Besides simply shorting RYT and going long IEF, what are some other ways to take advantage of this pairs trade?