Stock vs bonds - using bond prices to predict stock returns

Currently the S&P has gone up while bond prices have come down over the last week. This makes bonds a more attractive trade off, and has short term bearish implications for the S&P. Using bond prices to help predict stock returns is a very useful tool, as an example when bond prices are up 5% over a 5 day look back period the average move in the S&P futures was $3,000 over the next 5 days. When bond prices were down 5% over a 5 day look back period the average move in the S&P futures lost -$2,000. As a comparison any random 5 day hold in the S&P futures returned $150! All results are based on 1 large contract trade, since 1982.

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