Recognize This Pattern in the S&P 500 vs Bonds Chart?

The ratio chart below shows the S&P 500 SPDR, $SPY, against the iShares Barclays 20+ Year treasury Bond Fund, $TLT, and it has a very recognizable pattern to it right? You see it, right there in front of you. It is a classic AB-CD pattern. Heading lower for new lows beyond the ratio of 0.90 from October. This means that Treasuries are outperforming Equities. Treasuries higher, so lower yields and Equities lower, a pullback in order. Oh, wait did you say it was a Cup and Handle? Yes there is that too, bullish for the ratio, signaling a move from Bonds into Equities. The Bond rollover is finally coming and stocks are poised to run to new highs. Hmm, so which one will it be? We will have to wait and see how it plays out. But this chart helps to explain why there are many diverse opinions about the future direction of the markets and why they are changing frequently. Keep an eye on it. Knowing the broad direction of the market determines a lot of how successful you will be as a trader or investor, and in the meantime watch the price action closely of the particular vehicle you are trading, shorten your timeframe or shrink your size or both.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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