Can Earnings Haul the S&P out of the International Ditch

• Posted by Greg Harmon
• on October 17th, 2012

The German DAX Composite, $DAX and the S&P 500, $SPX have been moving in a very tight channel relative to each other over the last year. From the ratio chart below, the 4.60 to 5.10 range has created this long channel. There have been signals from both that the channel will be broken, first by a move higher from the S&P in March, then by the strength of the DAX in June. Now the S&P is showing relative strength again. Will it be enough to get through this time? So far the US market

has been pretty resilient during the first week of earnings for the 3rd Quarter and maybe that will, as my son suggests, haul the ratio over the top, out of the ditch, and on the way back to the 5.40 to 5.60 range that prevailed during much of 2010 and 2011. That will be a supporting factor, but it seems likely that the range will hold until after the election.

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