The Relationship between Stocks and Bonds Approaches Resistance

The equity market has surpassed its 2007 peak already and the bullish cheerleaders are just jumping up and down for new record highs. However, there is one relationship that has yet to breakout – the S&P 500 and 10-year Treasury ratio. There is a falling trend line from the 2000 high to the 2007 high that we are slowly approaching.

Below is a monthly chart of the S&P 500 ($SPX) vs. the 10-year Treasury Note ($UST), this is comparing the price action of stocks vs. bonds (not bond yields!) going back to 2000. The falling trend line has yet to be tested and while we can speculate its importance, until we get there we can’t know. If things continue to shape out as they have been for the last couple of months with equities kicking the tail off of bonds then we will find out sooner rather than later what the reaction will be to this resistance and its implications for the capital markets. Until then we patiently wait.

 

spx ust

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.