Equities are going a little exponential. And there is a lot of discussion about whether we’re in a Bubble and the stock market is about to crash. Time to watch the Bond market.
Looking at the last two Equity market highs – in 2000 and 2007 – the Bond market was the best clue that Equities were about to turn and get hit hard. Bonds strengthening for 2-4 months before Equities topped out and started to turn down. Currencies, on the other hand, weren’t much help in warning of an Equity market top. Currency trends continued well after the stock market turned.
Bonds have been in a downtrend since May. We’re trapped at the moment in a congestion zone marked by Professional bars. But we’ll get resolution in the next week or two. If the Smart Money is really taking profits in Equities, then Bonds will start to rally. Let’s see.
Good luck with your Emini trading next week.