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LONG-TERM RATES MOVING BEFORE STOCKS

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The 10-Year Treasury Yield ($TNX) is largely positively correlated with the S&P 500 - and also shows a propensity to lead the stock market. The chart below shows the 10-Year Treasury Yield peaking in July 2007 and stocks peaking in October 2007, three months later. Similarly, the 10-Year Treasury Yield bottomed in December 2008 and stocks bottomed in March 2009, again 3 months later. The 10-Year Treasury Yield now has peaks in early June and early August. In addition, the 10-Year Treasury Yield broke below its July low with a decline into early October. Should the current pattern hold, the stock market would be expected to peak between September and November. This period is three months after the June peak and three months after the August peak in the 10-Year Treasury Yield ($TNX). If we take the middle, then that means an October peak for the stock market. So far the S&P 500 remains above its early October low and the medium-term trend has yet to reverse.

091106tnxspx
Click this chart for details.

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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