Technical analysis of the Dow 20 Bond Index by Howard Waxenberg
Over the years, the correlation between moves in the bond market and moves in the stock market has
been tremendous. In the last several years, we have repeatedly seen the condition where bonds rally and
then four to six weeks later stocks start a bull move. There is a repeating pattern at tops as well where
bonds top out and, on average, two weeks later equities begin to falter. So, it makes sense then, that
predicting moves in the bond market through technical analysis has two effects. First, of course, is
predicting the future direction of bonds and interest rates, and second, through knowing the direction of
bonds we can have an outlook on equities, both the direction and the duration of an expected move.
Today there are many measures of the debt markets and many debt markets to measure. There are
government and corporate bonds and notes, Treasury bills, debt instruments from government agencies,
CDs, the money markets, and so on. There are financial futures, options on financial futures, closed end
bond funds, utility stocks and here, in the investment vehicles, the list also goes on.