Bonds Are The Dog Wagging The Equity Tail
A relatively quiet week on a close-to-close basis as not much movement because of no move in the bond. The bond-stock correlation is extremely high. The bond and S&P500 have moved in the same direction in 15 of the 19 trading days during this correction, that is about 80 percent versus 53 percent for the current year before the crash and around 40 percent for the prior two calendar years.
The stock rally on Friday was clear evidence the bonds are the dog that wave and stocks tail. The 10-year yield fell 5.5 bps Friday, and the S&P500 rallied 1.60 percent.
The S&P500 managed to close above the key 61.8 percent Fibonacci level.
Credit has not come back, and sovereign spreads in Euro periphery are starting to blow out probably due to worries over the March 4th Italian election.
Lumber prices continue to grow to the sky