Bond turning points as a regime check on equity double tops and breakouts

Bonds usually reverse first

Bond prices and stock prices usually move in the same direction. At major turning points, bonds typically reverse first, rising before stocks at bottoms and falling before stocks at tops.

That sequence is the bond-lead. Intermarket-analysis uses it so a single equity setup sits in a broader price-and-regime context.

Apparent-decoupling as an early warning

When bonds and stocks appear to move independently, that interval can be an early-warning lead rather than a true break in the link. That stretch is apparent-decoupling.

Bonds fell in April 1987 four months before the August stock peak. Bonds turned up in mid-1991 six months before stocks.

From late 1987 through the first two months of 1992, bond futures and a broad stock index generally trended together. Bonds turned first at the 1987 bottom, the 1989 top, and the 1990 bottom.

A bond double-top and an unconfirmed high

A late-1989 double-top in bonds contributed to equity weakness into 1990. A summer-1990 stock-index high that bonds did not confirm is an unconfirmed-high. It preceded a late-summer decline in both markets.

Bonds turned up one month before stocks in September 1990. A February 1991 bond peak coincided with the start of a 10-month trading range in stocks.

Breakout after a mid-year bond upturn

A mid-1991 bond upturn preceded a stock-index breakout by six months. A one-point official discount-rate reduction on 20 December 1991 then lifted bonds to a four-year high and stocks to a new record.

From late October 1991 into early March 1992, bond futures led the stock index first higher and then lower. An early-1992 bond decline that coincided with a commodity rebound pulled stocks down.

Interest-sensitive utility equities usually trend with the bond market and can also lead the broader stock market. That utility-confirmation showed up when they declined with bonds during the first two months of 1992.