REAL WORLD
Treasury Bond Yields and
The S&P 500
by Mark Vakkur, M.D.
Interest rates have long been tied to movement in the stock market. Here's how to test trading rules for the stock market based on a six-month moving average of the 30-year Treasury bond yield, showing us when it may and may not be profitable to invest in stocks.
FIGURE 6: TRADING SYSTEM BASED ON PREDICTED CHANGE
IN THE S&P. Here are the results of using the trading system from Figure 5
based on the predicted monthly change in the S&P 500 from the linear regression model
for 1976-95.
"The yield itself is not nearly as important as the trend in the yield. This brings us to a sticky problem, one at the heart of most technical trading systems: how should we define trend?"
Excerpted from an article originally published in the August 1996 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved.
© Copyright 1996, Technical Analysis, Inc.
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