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10 Year Bonds Signal Equity Inflection Point at Trader’s Narrative

According to the simple stock market timing method which relies on the 30 day rate of change of the 10 year treasury bonds, we are very oversold and should expect a rebound here.

This system is somewhat better at finding tops than bottoms, but it is a good general indicator to throw in the pot:

10 yr bond yield ROC november 2007

The rate of change (bottom panel) is really off the charts. The chart doesn’t go back that far but we haven’t had a reading this low since May 2003 when the S&P 500 was at 1000; lifting off a triple bottom and escaping from the clutches of the bear market.

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7 Responses to “10 Year Bonds Signal Equity Inflection Point”  

  1. 1 scood

    It would be interesting to see the chart of that same relationship from Jan. 01- June 03 since we may be entering a similar period now w/the fed lowering rates in rather rapid succession- thanks for always illuminating data

  2. 2 Babak

    scood, sure I’ll see if I can dig it up

  3. 3 scood

    Did you notice money market funds passed 3 trillion last week for 1st time, add in 1.7 more for sov. wealth funds [maybe theres some dbl counting in combining these two and some of the sov. funds $ are obviously already invested] and give or take a few bucks thats a lot of christmas buying power!

  4. 4 Babak

    scood, no I hadn’t looked at fund flows in a while. You think that’s flight to safety? or what?

  5. 5 scood

    Some certainly is, but its been building for several yrs. Maybe you nailed it in Aug. when you mentioned AAII sentiment wasnt that bearish because the individual is not involved enough to be bearish. But the sorry reality is that cash is getting creamed these last few yrs- at least if you look at its purchasing power in real goods that we NEED or look at gold, xchange rates, ect. Its also funny that I keep reading that theres no cash- as in, the banks and other money changers have no cash, and— cant get no cash—- but theres a record 3 trillion in MMs— go figure. I guess its all just locked up in pure gut clenching fear. So the Fed. is pumping out some more cash to make sure theres enough cash, just in case we need more cash {which we can add to the 3.0 and the 1.7] Maybe when everyone wakes up they’ll find that theres plenty of cash to put to work and it might even last a while.

  1. 1 Sentiment Overview: Week Of November 30th 2007
  2. 2 Sell Bonds, Buy Stocks

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