Dow Jones Corporate Bond Index:

The Dow Jones Corporate Bond Index is our primary bond indicator. This index is comprised of 96 investment grade issues that are divided into the Industrial, Financial and Utility/Telecom sectors. As well, they are further divided by maturity with each of the sectors represented in the 2, 5, 10, and 30-year maturity. All issues are equally weighted and strict rules for liquidity, rating and issuers are applied. The index is reviewed monthly and maintained by Ryan Labs. We use the price return value for the index, instead of the total return index because a total return index will have a positive bias and we feel that evaluating the index itself is more appropriate for our needs of determining strength or weakness in the corporate bond area.

The Dow Jones Corporate Bond Index is longer term in nature. If we want to get a nearer term outlook, we can adjust the box size down to make the chart more active. When evaluating the DJCORP chart, we look at buy and sell signals as well as high pole and low pole warnings. That is, when the DJCORP is on a buy signal, it suggests higher bond prices and thus lower rates. Conversely, when this chart is on a sell signal it suggests lower bond prices and higher rates. A high pole warning is defined as a "pole" of X's up more than 3 boxes than the previous X column. The warning comes when the index falls more than 50% of the number of boxes up in the pole. Let's say for instance that the pole of X's up was 10. If the DJCORP were to fall 6 O's, that would cast a shadow on the last buy signal. The low pole warning is the exact opposite with the warning, of potential improvement, would be when the reversal up to X's exceeds more than 50% of the O's down in the pole.

Some of the more notable signals from this chart and its predecessor, the Dow Jones 20 Bond Average, include a sell signal in October 1993 followed by a buy signal in January 1995. The DJCORP chart gave a sell signal in March 2005 and continued to give sell signal after sell signal for more than a year while the Federal Reserve raised interest rates 15 times.

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