One Clear Trend Continues Unfettered

• Posted by Greg Harmon
• on May 15th, 2014

The S&P 500 is peaking and about to fall…..or just consolidating. Treasury Bond prices are set to crater……or make another run higher. Crude oil is ready to fall back to the 70’s…..or rise to $140. Gold is pausing before another leg lower…. or about to move out of a base higher after a pullback. Confused? There are not many markets that are moving in a clear intermediate or long term trend right now, so don’t be worried if you answered yes.

But there is one place where there has been a trend in place for a long time. Since July 2009. And it shows no signs of stopping. It is the ratio of the Shanghai Composite to the S&P 500. It has been moving lower since the peak in July 2009. The chart above, using the $SPY ETF, shows a steady channel lower. This channel is moving parallel to and underneath the falling Simple Moving Averages (SMA). The price action has nearly retraced the entire leg higher from 2005 through early 2008. This was when the Chinese market was booming. But that price action is also drawing a bullish Deep Crab harmonic that targets a much lower level, in fact zero. Clearly that is not going to happen, you get the point. The technicals are pointing lower still. You want a clear trend. There you go.

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