Bonds Market, Stock Market And How They Connect
As you can see, US and German Bonds are moving more or less together and the same thing is with US and German stocks. Of course, there are no perfect correlations, but overall looking they are in positive correlation.
At the same time bonds and stocks are also more or less in negative correlation and again, there are no perfect correlations, but at the end they always somehow get caught.
What we currently see from Elliott Wave perspective is that both, US and German bond markets might be finishing their corrections, which would be limited for the stock market. So, if we are on the right path, then stocks may face resistance, at least a temporary one. US stocks (S&P 500) may see a decline from the upper ending diagonal line, while German stocks (DAX) may face a temporary resistance at the upper channel line.
However, this is not the case yet, but if bond market suddenly bounces and stock market declines in strong and impulsive fashion, then we should be aware of the potential risk-off sentiment that can lasts for some time.
Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
BUND + 10Y US NOTES vs. DAX + S&500