The pattern of the markets

One of our strategies we use is based on the following pattern between stocks and high-grade bonds. (We also make large use of strategies based on business cycle developments).

1. The bottom in the stocks market is followed by a peak in the bond market (prices).
2. A bottom in the bond market is followed by a top in the equity markets.

This relationship, if keeps repeating, is saying to sell bonds following a visible bottom in the stocks market. It is also saying to start selling stocks if the bond market strengthens in a convincing way. It is also suggesting to stay in bonds as long as the market remains weak or after a strong market move.

Right now high-grade bonds are not doing well. They have been weak since mid December, a month after the bottom of the stock market.

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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