Seeking Alpha

AaronJackson's  Instablog

AaronJackson
Send Message
I'm a professional swing and position trader using mostly stocks and options. I trade my own accounts and author At The Money Charts ( www.atmcharts.com ) Feel free to hit me up on stocktwits http://stocktwits.com/a_jackson or twitter @atmcharts where I share trade ideas and thoughts on the... More
My company:
At The Money Charts
  • The Stock Bond Correlation Cycle 0 comments
    May 2, 2013 10:14 PM | about stocks: SPY, TLT

    A couple of months ago I posted this chart on Stocktwits. The main thing I am looking at is the SPX:TLT correlation cycle. I also included the views of USD, TLT and SPX for analysis purposes. I'd like to say that i'm not very experienced with cycles so I might be way off base. However, I found some neat things that may mean something to somebody!

    Notice the SPX / TLT correlation cycle bottomed in February 2011 while stocks were in a topping phase and bonds were bottoming. This same scenario happened again just a few months ago in January - February.

    In 2011, as the cycle turned up, bonds turned up and stocks continued in a topping phase. Then as the correlation cycle peaked and turned down in 2011, stocks suffered a significant draw-down.

    Since the cycle bottom SPX is up 6% while bonds have completed a bottoming phase and are up 8% off the lows. In 2011, TLT rose 12% into mid summer before SPX topping completed. The largest notable difference in the two occurences is that SPX has been rallying and not just loitering in a toppy range.

    Given that evidence, i'm not trying to predict a 20% sell-off, but this could mean we see relative weakness (at least) in stocks this summer.

    (click to enlarge)

    I also find it interesting how cycle troughs two and three occurred while bonds were in topping phases and signaled bull market corrections AT the lows.

    Maybe all this will be useless in the future, or maybe at some point this could be a valuable piece of evidence. Who knows. Thanks for taking your time to read this. Good luck out there!

    I'd love to hear some thoughts on this. What do YOU think?

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Stocks, Bonds, Correlation Stocks: SPY, TLT
Back To AaronJackson's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.