Chart 7 shows the short-term WillGo at work in the 30 Year Treasury Bond market. The important point, and the first I want to make, is that the chart shows the closing price for Bonds for the week ending close of May 8, 2009. Yet, WillGo was forecasting out to May 22nd. This is the power of WillGo in the Bond market, it gives us a two-week lead indication of what bonds should be doing in the future.
The above peaks and valleys in WillGo have been marked them off with the gray vertical lines. These points were known two weeks prior to their occurrence. This insight is what this very unique indicator brings to the table.
WillGo did a superb job of calling the large year-end rally in the Bond market, not only forecasting that in advance but giving us an idea of how substantial the move would be. Then two weeks prior to the market topping out, we had a very good idea a decline would come around the first of 2009. We had the visibility of WillGo entry into a steep downtrend. As the year continued, the indicator forecast a rally in the middle of February and a decline to start in the middle of March; that is pretty much the road Bond prices followed.
As this is written with data ending May 8th of 2009, WillGo is suggesting a rally in the Bond market. You will be able to see what happened in the future... I don't know what it is at this moment, but we know what WillGo is suggesting... a rally.
The basis for the indicator is the spread between high-yield stocks and bonds as published in Barron's each week as the Barron's High Yield Bond Stock Spread.
WillGo of course is a measurement of this index. Essentially I am taking a rate of change of the bond/stock spread and extending it into the future. In the case of bonds the extension is two weeks into the future... in the case of stocks it is extended five weeks into the future.
Let's take a look at another time frame of the index and the Bond market.