Gibsonís Paradox by David Penn
Can an old gold-standard truism tell us anything
about stocks and bonds today?
One of the more helpful tenets of intermarket technical analysis has been the rediscovery of the leading relationship between stocks and bonds. In most market conditions, stock prices tend to follow bond
prices. While there was a significant lag from time to time, this pattern held up remarkably well for most of the 20th century ó so much so that it has become
almost a truism among those technical analysts who include intermarket study in their observations. As John Murphy wrote in his classic Intermarket Technical Analysis, "Since bonds and stocks are historically linked together, technical analysis of one without a corresponding analysis of the other is incomplete. At the very least a stock market trader or investor should be monitoring the bond market for confirmation."