Hi Mohan,..Re:<<Dow peels back from highs, hit by sell program>>
I've noticed over the past month or so that on many days there is a correlation between tyx (long bond rates) and SP8U. When tyx is declining, SP8U has also been declining; however, when tyx goes up, the S&P rallies. This has been closely correlated on many days and deviated on others.
I've been meaning to dig up more data on this but it might have something to do with the narrowed spread between the overnight lending rate and the fed funds rate. When the spread narrows, don't the banks' profits also narrow? I keep thinking that one of these days, when I have lots of time, it would be interesting to check out the bank/insurance co. weighting of the S&P to see how strong that bias might really be.
In other words, without a rate cut, there may be an equilibrium rate below which profitability for the banking, brokerage, insurance industry starts declining.
Just a thought,
Lee |
