I have noticed that my set of rules, formed over the years, is no longer valid. When I began working, a rise in the price of crude oil would cause a fall in bonds, since its inflationary expectations were eloquent. In the past couple of years, on the contrary, I noticed the opposite was happening.

Much in the same way, in the old days, an upward move in stocks had to be accompanied by a similar one in bonds as the two were highly correlated. It could be, however, that the extraordinary low yields of the past years were in fact just an aberration, caused by the severe recession of the 2001-2003 period.

Thus, the changing cycle could be due to the fact that yields can go back to a "normal" level, i.e. falling bond prices, without affecting the rise of stocks to their highest levels. By "nadir" I just meant close to their relative highs (namely the Dax 7040ish level).

Victor Niederhoffer writes:

Stocks are not near a nadir now but are they close to an acme? In the past when stocks went to their nadir, bonds rallied.


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