SPX and Interest Rates
The SPX is at all-time highs near 1900, and so is the Dow Jone Industrial Average, although the Nasdaq and the Russell 2000 are not participating yet.
But the strangest correlation right now is between the SPX and the Bond Markets, specifically the 10-year Interest rates. Normally, capital either flows into the Bond market or the Stock market. In essence, the two compete with each other for capital. If there is a “Risk Off” sentiment, money flows into the Bond markets, and if there is a “Risk On” sentiment, then money flows into the stock markets.
However, in the last two months, both these markets have been going up.
The video below explains this anomaly, and what traders and investors should be watching for. If you don’t follow the Bond markets or the interest rates, the video also shows you simple ways you can track them.
Bottomline – one of these has to give. And in general, the Bond markets is always considered to be the Smart Money. This could spell trouble for the SPX, especially given that the Nasdaq and the Russell 2000 are not anywhere close to all-time highs like the SPX is.