Market Timing, another look

In one of my former posts, December 7, 2020, I discussed looking at the relative relationship between the bond market and the equity market to gauge investor sentiment. In that post I stated:

“In the past, which is certainly no predictor of future behavior, the movement of the U.S. Treasury note and bond market, has behaved in an almost opposite manner to the equity market. The avoidance of equity risk has shifted the money flow into the safe haven of U.S. Treasuries and vice versa. In the past then, the equity market has been negatively correlated to the Treasury market. So, when equities are getting strong, Treasuries should be getting weaker, etc.”

The following is a chart of SPY and EDV as of the close yesterday, January 27, 2021, and it appears from the attached that the equity market is still in a nice uptrend.

I have added a 200-day exponential moving average to the present illustration.

Some have noted, historically, that when the SPY is considerably above the 200-day moving average, that a correction may occur. Yesterday’s close meets those criteria. In February 2018, prior to a correction, the 200-day moving average was approximately 12% above the index. Yesterday’s close was approximately the same.