Stocks And Bonds Break Apart
- Posted by JC Parets
- on August 27th, 2013
A funny thing happened on Monday afternoon. As stocks rolled over into the close, US Treasury Bonds didn’t follow. This is now something different, a change in character for these markets. Last Friday we ran the numbers: Stocks and Bonds ($SPY & $TLT) had a 1-week positive correlation of +0.95, a 2-week correlation of +0.94 and a 1-month +0.79. The results showed a very high positive correlation between the two asset classes. Interest rates rising was bad for stocks and bonds. But no more.
I was pretty vocal on Stocktwits Monday about this shift in market behavior. But since this has now continued into Tuesday, I think it’s worth a quick blog post. Lower rates are now negative for stocks.
Here is a 10-minute chart showing the close relationship between the two asset classes. They came apart around 2 o’clock Monday:
With stocks selling off, it seems as though the market is looking for the safety of US Treasury Bonds. Safety appears to be the priority, not the fear of higher rates. This is an interesting development.
I’ll follow up as this behavior continues. I think this is just the beginning of the return of negative correlations.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
- Keeping It Simple With Wheat
- NYC MoneyShow: A Technicians Process
- Gold Miners Are Consolidating Nicely
- Paging Doctor Copper
- Register Here To Access My Favorite Charts
- Technical Analysis and Shopping Malls
- MoneyShow Video: Technical Analysis Myths
- We Started From the Bottom Now We’re Here
- IB Times: Stocks & Commodities in 2014
- It’s Time To Own Coal Stocks
Archive by Year