SPX Trendline Battle, Relative Strength in RUT

We reviewed the daily charts after yesterday’s close and noticed that the Russell 2000 Index, the NYA and transportation stocks all exhibited relative strength (the same holds actually for the DJIA), particularly vs. the FANG/NDX group. This is happening just as the SPX is battling with an extremely important trendline. As we pointed out before, relative strength in the RUT in particular served as a short term reversal signal ever since the sell-off started in February. The question is if this signal will continue to work. Here is an updated chart:

 

The SPX, the RUT and the RUT-SPX ratio. Relative strength in the Russell persists, and it has acted quite firm over the past several days in the face of growing weakness in the big cap tech sector. On previous occasions this has indicated an imminent short term upside reversal. At the same time, the SPX is sitting on the decisive trendline recently discussed by Dimitri Speck in connection with “crash analogs”. Interestingly, the Modified Ned Davis Method flipped to a 50% net short position on the Russell last Friday – will it be whipsawed again?

 

Market Psychology Revisited

We also want to briefly show another short term signal, in this case a well-known sentiment/positioning measure, namely the equity put-call ratio. Below is a weekly chart (candlesticks) of the CBOE equity p/c ratio. This is quite interesting to us, as it confirms something we pointed out in yesterday’s “GBEB Death Watch” article: the recent sell-off has so far utterly failed to generate any fear.

 

CBOE equity put-call ratio, weekly candles: “no worries mates!” – the peaks reached in the two selling squalls since early February came in at essentially meaningless levels. Even the tiny dips of 2017 generated more fear or invited more intense downside speculation.

 

It appears traders are well-trained by now: there is nothing to fear, all downturns represent dip buying opportunities. As long as the trendline shown in the SPX chart above holds, they may well be right of course – and yet, this nonchalant response to one of the biggest selling waves of recent years is definitely out of character. And once again, we are mildly surprised how little attention such factoids seem to be getting these days.

Instead, a quite common refrain is this: “the economy is strong, therefore the stock market is safe”. Naturally, valuations do not rate a mention in these analyses, and admittedly valuations have not mattered for quite some time. Perhaps the little tidbits no-one seems to be looking at anymore will though.

 

Charts by: StockCharts

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • How the Fed Robs You of Your Life
      Fiat Currency Rankings - From Bad to Worse Today, as we step into the New Year, we reach down to turn over a new leaf.  We want to make a fresh start.  We want to leave 2019’s bugaboos behind. But, alas, lying beneath the fallen leaf, like rotting food waste, is last year’s fake money.  We can’t escape it.  But we refuse to believe in its permanence.   This is what “monetary stability in the Fed-administered fiat money regime looks like: in the year the Fed was...
  • Wealth Consumption vs. Growth - Precious Metals Supply and Demand
      GDP – A Poor Measure of “Growth” Last week the prices of the metals rose $35 and $0.82. But, then, the price of a basket of the 500 biggest stocks rose 62. The price of a barrel of oil rose $1.63. Even the euro went up a smidgen. One thing that did not go up was bitcoin. Another was the much-hated asset in the longest bull market. We refer to the US Treasury.   BofA Merrill Lynch high yield master II option-adjusted spread: on Dec. 23 it tightened to the  lowest level...
  • Geopolitical Shocks and Financial Markets
      Involuntary Early Retirement of a Middle Eastern General The procession of news through the week – namely that chronicling the aftermath of the targeted drone strike and killing of Iranian General Qasem Soleimani – advanced with an agreeable flow.  The reports at the start of the week were that Orange Man Bad had spun up a Middle Eastern mob of whirling dervishes beyond recall. World War III was imminent.   The recently expired general, when he was still among the quick...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!