Friday, June 22, 2007

TLT And The S&P



Two weeks ago I posted about how I was using TLT to help forecast what the S&P might do. I've been using this as a day trading indicator and it has made me and some other traders money based on the many emails I've received over the past 2 weeks.

Today we saw the S&P and TLT trend in opposite directions. Today could be the first sign that this relationship is beginning to decouple. If you recall from my original post about using this indicator, I said that these relationships come and go...At times the market will focus on oil or the dollar, at other times it will be the carry trade or the Asian markets, lately it's been interest rates. Today seemed like a flight to quality as investors dump stocks and move into bonds.

I'll still watch the relationship between the S&P and TLT (bonds) on both the long and short-term time frames, but today's action was definitely worth posting about.

2 comments:

chiu said...

Will it be easier to watch TNX (10 Year Note Yield) which will give the same direction instead of invert relation.

Kevin said...

When the S&P and TLT are trending together which they do most of the time, it's easier to look at TLT in my opinion...When the relationship decouples like it did on Friday, I still find it easier to watch TLT...I think it might get confusing to keep switching from TLT to TNX.

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