Long BONDS? Bond futures strength could spell S&P 500 weakness

The recent upside in the bond market has been in tandem with the upside in the S&P 500. The move higher in bonds is largely due to the lower rates in monetary policy. Which should not directly affect long-term bonds by much but they have had some effect. Over the past three months, Bonds have gone down while the S&P 500 has made a lot of gains.

The 30-year bonds should rebound at the previous broken high which should hold as support. Max, the move may go down to the 50% retrace level based on the Fib retracement before rebounding. Till the retrace opens up we could see more upside in the equity market. The long extended wicks near support suggest the bond buyers coming in a pop above the recent high into all-time highs could crush the S&P 500.

There is a chance that the bond market continues to drop through the support levels, the opening upside for the equity market. This is the tail end of bond investments that have grown exponentially over the last year.

Correlations in markets are pivotal to identifying the current economic cycle on a longer-term perspective.