At some point in the near future, we can expect bonds to sell off to a lower level as they have been selling into the bond rallies ever since the Fed announced that huge support for the bond market since late last year. Therefor, I am looking for entries into calls on TBT on dips from here on out.
The following charts speaks for itself and is part of the stealth rally that has been going on since March.
I am not saying that all money that is coming out of bonds is going directly into stocks, and definitely not all into US stocks, but the bond bubble has been a long time in the making and is the last big bubble to be deflated. In order to dispel some of the common myths, I thought it appropriate at this time to study the relationship between stocks and bonds. It is not a correlation that is in lock step with stocks like we have seen with the USD lately, but there is a correlation to be observed. Usually, the move in bonds precedes the move in stocks. At first, the stocks may even sell off with bonds but that is the dip that I expect will be bought if/when that happens in the coming months. Higher bond yields will give the bears plenty to gripe about, but in the end, as long as the yield on the UST10Y holds below 5%, I think the economy will continue on the path of recovery.