It's not unusual for me to be early (vs. late) as I do typically err on the side of caution when $$$ are involved, and I prefer to be prudent rather than gutsy. That said I'm always closely tracking the charts/indicators I've grown to value and trust over time as I am vigilant about not committing the behavioral sin of getting overly-attached to an investment stance. Pay heed to your process, stay disciplined, but also remain flexible and always look for reasons why you could be wrong this time. It's a tricky balance (and why this business ain't easy).
After reviewing several such charts and indicators, I do still see some lasting divergences that are concerning, one being small-cap performance versus larger-caps.
Source: Stockcharts.com
The chart above shows the relative return of the Russell 2000 Index (IWM) versus the S&P 500 (SPY), plotted with the S&P 500 in the background (green line). Note that despite the new all-time highs in the S&P 500, IWM performance has lagged SPY performance with a red line identifying the bearish divergence. I would also point out that the RSI of the IWM:SPY ratio exhibits a bearish divergence, and that the Aroon Oscillator of the ratio remains repressed -- further non-confirming signs of the market's latest advance.
Source: Stockcharts.com
The HYG:TLT ratio has been heading in the right direction (up), however it needs to surpass its prior high set in March to confirm the S&P 500's new highs. Likewise, in the second chart, the $CYC:XLP ratio has been heading in the right direction but it appears to be rolling over at the key 100-day moving average (I've discussed this indicator in the past). Also, note the developing bearish divergence of the $CYC:XLP ratio as it looks to be making a lower high for the third time -- as it did in February-April of last year.
I will be the first to state that by definition, divergences lag and they can eventually disappear, i.e. finally confirming a move. However, in my experience, as they develop and remain in place one would be wise not to ignore the potential implications. All in all, I continue to be wary of this recent rally in the market.
I will be the first to state that by definition, divergences lag and they can eventually disappear, i.e. finally confirming a move. However, in my experience, as they develop and remain in place one would be wise not to ignore the potential implications. All in all, I continue to be wary of this recent rally in the market....how to invest in stocks
ReplyDeleteToday most accurate stock market tip
ReplyDeleteBUY HIND COPER ABOVE 71.50 TG-72/72.70/73.60 SL-70.75
stock market tips for intraday
At present, This website is a great resource of financial market and very important for us. so, I like your web site. Thank's very much for this informational website. If you want more informastion about stock charts to visit stock charts The stock chart is the most important part to a stock individual. A stock chart is to a speculator exactly what a rifle is to a soldier.
ReplyDeleteAt this moment, It is a fundamental and informative website about financial markets. It is very useful for us. So, I loved it. Many, many thanks to you for creating such an informative website. If you would like more information about this please visit stock market today The advantage of these stock market today is they allow for a vast amount of customization by the user. That same advantage can create a disadvantage for some users. Those users may not really know what they are looking for or what data criteria might produce a stock market today of stocks that present the highest possible probability of a successful stock trade.
ReplyDeleteyour blog post always good and also content so well . Epic Research research team give accurate tips in stock market .
ReplyDeleteAppreciate your blog posst
ReplyDelete