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I rest my case. :-)
---- you wrote:
> The stock vs. bond correlation is still valid......but you must use a
> derived conditional variable to compare the two to obtain a decent
> R-squared.
>
> bondvar = -1 * (bond_rate_chg - bond_rate_maxchg) * factor *
> bond_rate_chg...etc, etc.
> (an example only)
> stockvar = (price - price[1])/price[1]*100;
>
> When bond rates go about a certain "max" as indicated by the market, THEN
> bond prices negatively correlate with the stock market. Otherwise, mildly
> rise bond rates at "low" levels produce positive correlations. Oh, and there
> is a time-lag factor in there as well ! The above is an example to show that
> many correlations are not simple. You just can't compare A to B....usually
> there are time-offsets to consider as well as more conditions to factor-into
> the variable.
>
> Check it out....a big study was done on this. This also makes sense from an
> economic standpoint.
>
> Where's the "max" today ? Dunno...could be 7 or 8 % on the long bond.
> Implications: if rates stabilize in the next 6 weeks and we don't reach the
> "max", then a big, big rally in stocks is coming.
>
> > -----Original Message-----
> > From: the_omega_man@xxxxxxxxxxxx [mailto:the_omega_man@xxxxxxxxxxxx]
> > Sent: Saturday, May 27, 2000 12:35 PM
> > To: Stewart Taylor
> > Cc: Omega List
> > Subject: Re: You got game?
> >
> >
> >
> > With the greatest respect for both Stewart's opinion and Robert's
> > I believe
> > that "intermarket" relationships are very difficult to demonstrate. My
> > respectful suggestion is that one should, if attempting to use them, have
> > some *totally mechanical* way to indicate when they are breaking down.
> > (Perhaps money management takes care of this.)
> >
> > I, too, know a number of respected traders/investors who use intermarket
> > analysis. I believe that they are fooling themselves and are, in essence,
> > no better off than the stock market player who watches the
> > Lakers' results
> > against Portland. They are watching a correlation which exists, but it
> > is without causation.
> >
> > Stewart - what has happened to the long term "relationships" of
> > stocks and
> > bonds over the past few years? How would you characterize the
> > "intermarket
> > relationship" of stocks to bonds from late '98 through the beginning of
> > this year? Is that relationship the same as it had been prior to
> > late '98?
> > What happened to the "cause" of this "relationship"? Would stock-bond
> > intermarket systems fare well over time?
> >
> >
> > Good trading,
> >
> > OM
> >
> >
> > "We do not see things as they are, we see things as we are."
> >
> >
> >
> >
> >
> > At Sat, 27 May 2000 10:01:55 -0500, Stewart Taylor
> > <staylor@xxxxxxx> wrote:
> >
> > >
> > >
> > >One more thought, I think its also important to realize and understand
> > >what
> > >the market is focusing on. For years I kept an intraday matrix with
> > >Bonds,
> > >Dollar, CRB, S&P, Crude, DM, Gold and Beans. I would jot down a reading
> > >every 20 or 30 minutes or anytime the bonds made a big intraday move
> > >and
> > >then scroll through the charts. There were certainly short periods of
> > >time
> > >when the market concentrated intently upon another market (about 90%
> > >of my
> > >trading is in the bond market). Those times when you could figure out
> > >what
> > >the market was focusing on, you had a significant advantage (usually
> > >in the
> > >form of the courage to act). But, it was a lot of work and I have gotten
> > >away from wanting to work quite that hard.
> > >
> > >I can remember times (back in the old days when we were all consumed
> > >with
> > >inflation fear) that you could put up an intraday chart of wheat or
> > >beans
> > >and get great insights into the short term movement of the bonds (higher
> > >wheat or beans = higher CRB = Lower bonds). Understand, that most traders
> > >are like anyone else, they have a compulsion to understand why things
> > >happen (plus, for the desk and prop guys at large firms, the first thing
> > >the boss asks after he comes to check your position is usually ... Why?).
> > >Anyway, if they afraid of inflation, they will focus on the CRB because
> > >it
> > >is on their screen, it is actively quoted and they have seen dozens
> > >of
> > >other traders watching it. You get enough traders watching the same
> > >thing,
> > >you get insight and possibly an edge.
> > >
> > >
> > >
> > >Hope all is well,
> > >
> > >Stewart.
> > >
> > >
> > >
> > >At 09:34 AM 5/27/00 -0500, robert.cummings@xxxxxxxxxxxxxxxx wrote:
> > >>Were always looking for that elusive lead indicator. The platform on
> > >which
> > >>holy grails can be derived. I agree you can't trade this inter market
> > >>stuff. I agree with Stewart certain considerations should be taken
> > >under
> > >>advisement. Example would be grain and meat prices. People monitor
> > >and
> > >>trade these ratios. I understand what OM is saying here and I agree
> > >with
> > >>him. To bad though if one market would lead another by about 5 ,10
> > >or 30
> > >>minutes consistently we could all be rich.
> > >>
> > >>Robert
> > >>
> > >>
> > >>
> > >>
> > >>At 05:37 AM 5/27/00 -0400, editorial@xxxxxxxxxxxxx wrote:
> > >>>This is why "intermarket technical analysis" is a farce.
> > >>>
> > >>>
> > >>>Good trading,
> > >>>
> > >>>OM
> > >>
> > >>
> > >Stewart Taylor
> > >Taylor Fixed Income Outlook
> > >Voice: 501-219-9774
> > >Fax: 501-228-0963
> > >E-Mail: staylor@xxxxxxx
> > >Web Site: http://www.cei.net/~staylor/
> > >
> >
> >
>
>
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