Cycle Trading

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Tonight I wanted to take a look at the relationship of bonds & equities and bonds & gold.

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Since about mid-September bonds and equities traded inversely to each other…

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While bonds and gold followed each other more closely.

And as we can see that stocks have been rallying while bonds & gold have been caught in the grip of an intermediate cycle decline.

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The daily bond cycle peaked on day 6 and printed its lowest point last Tuesday, day 17. Bonds printed a swing low on Friday and delivered some bullish follow through today. The break of the declining trend line signals a new bond cycle.

And if the relationships that we observed continues to hold, then we can expect weakness in stocks as gold begins to rally.