Stocks vs Bonds...go with Stocks

I have not posted this chart to the site before so lets review it before giving its current perspective. Basically it is a ratio of an 80% long stocks model to a 80% bonds model. When it is rising stocks are favored over bonds and vice versa. As you can see from the chart, it turned down in the spring of 2007 arguing that there was trouble to the bullish stance on stocks. Sure enough, things unraveled in the summer. On the other side of the spectrum, the model had a bullish reversal to the upside in Feb of 2009.

In looking at the current view of the chart, things are sort of rolling over following the crash in early May. However, as things are drawn, you can there is a double bottom which argues for a move to the top of the range. If it is moving to the top of the range and stocks are bullish, then bonds will suffer as a result. Thus this chart supports my bullish stance on stocks and bearish one on rates.

In looking at the components, momentum A and momentum B both argue that bonds are in favor. The oscillator A, used both as a trend indicator as well countertrend model, has been bullish since late 2009. So of formatting of the chart is bullish with a double bottom off the trading range and the oscillator model is bullish. Thus basically the model is neutral. However, given the current formation of the model, I expect it to trade toward the previous highs.

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