Comments on: Bonus Educational Charts June 20 http://blog.afraidtotrade.com/bonus-educational-charts-june-20/ Helping traders overcome fears and emotions in trading Thu, 09 Feb 2012 14:53:15 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Corey http://blog.afraidtotrade.com/bonus-educational-charts-june-20/comment-page-1/#comment-1385 Corey Sat, 23 Jun 2007 23:54:35 +0000 http://blog.afraidtotrade.com/bonus-educational-charts-june-20/#comment-1385 I plan to post a more extended entry, but for simplicity's sake, bonds tend to lead the stock market because of various reasons, including more sophisticated "in the know" participants, forces that move prices, close ties to direct economic reports/conditions, etc. The stock market has many more speculators (retail traders) that can drive prices strangely, and are not as tied to economic conditions (individual stocks, that is). StockCharts.com provides the Dynamic Yield Curve Charts as well as historical chart relationships. The theory is that 'rising rates are bad for the stock market' and in theory this is correct, but the historical charts do not show this relationship. Rates rise during rising, expanding economies (to cool inflationary pressures) and fall during poor economic conditions (to stimulate the falling economy). There is a short-term relationship (when the Fed raises rates, the market tends to drop if the rate hike is unexpected) but the long-term relationship is one of positive correlation. I will try to highlight and post more sources as time permits. Thank you for your comment and question, Bill. I plan to post a more extended entry, but for simplicity’s sake, bonds tend to lead the stock market because of various reasons, including more sophisticated “in the know” participants, forces that move prices, close ties to direct economic reports/conditions, etc. The stock market has many more speculators (retail traders) that can drive prices strangely, and are not as tied to economic conditions (individual stocks, that is).

StockCharts.com provides the Dynamic Yield Curve Charts as well as historical chart relationships.

The theory is that ‘rising rates are bad for the stock market’ and in theory this is correct, but the historical charts do not show this relationship. Rates rise during rising, expanding economies (to cool inflationary pressures) and fall during poor economic conditions (to stimulate the falling economy). There is a short-term relationship (when the Fed raises rates, the market tends to drop if the rate hike is unexpected) but the long-term relationship is one of positive correlation.

I will try to highlight and post more sources as time permits. Thank you for your comment and question, Bill.

]]> By: Bill http://blog.afraidtotrade.com/bonus-educational-charts-june-20/comment-page-1/#comment-1383 Bill Thu, 21 Jun 2007 11:06:24 +0000 http://blog.afraidtotrade.com/bonus-educational-charts-june-20/#comment-1383 Corey - As bonds and yields seem to be driving market (in down days) . What are your thoughts around this . Any charts that can show historical relationships ? Rates dropped for years , now seems we may be in an up trend . The bond market ultimately deciding interest rates charged ( and paid) to you and me, right ? Bonds are a very weak point for me . Any comments woulds be appreciated . Thanx- Bill Corey -
As bonds and yields seem to be driving market (in down days) . What are your thoughts around this . Any charts that can show historical relationships ? Rates dropped for years , now seems we may be in an up trend . The bond market ultimately deciding interest rates charged ( and paid) to you and me, right ? Bonds are a very weak point for me . Any comments woulds be appreciated . Thanx- Bill

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