Are bond and stock prices correlated?

There is much talk right now about the relationship between the stock market and bond prices.

Why? Because 10-year Treasury bonds (ETF: TLT) have soared since July (click on the chart to enlarge it).

This is how I read the two graphs. TLT moved higher beginning in June 2007. The market started heading lower in October 2007.

TLT peaked in December 2008. The market bottomed in March 2009.

TLT moved decidedly higher in July 2009. Is the market going to peak?

It looks like the two markets are not coincident. TLT seems to lead the market. If it does -- and TLT remains strong -- the S&P 500 should be at a top. Time will tell if this relationship remains valid.

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George Dagnino, PhD
Editor, since 1977
Ranked No. 1 market timer by Timer Digest