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5 Divergences Worth Noting
Here are 5 negative divergences worth noting.
Will someone please explain these to me? Is it QE to infinity? Distorted market signals? Or just investor savvy to know when to hold 'em or know when to fold 'em? We are wondering if and when these signals will have significance.
Divergence 1 is between the S&P Depository Receipts (symbol: SPY) and the i-Shares i Boxx $ High Yield ETF (symbol: HYG). Note how HYG has not confirmed the high in SPY.
Divergence 1. SPY (blue) v. HYG (red)/ weekly
Divergence 2 is between the S&P Depository Receipts (symbol: SPY) and the Rydex Bullish and Leveraged to Bearish and Leveraged ratio (10 day moving average). The Rydex asset data is sentiment data, and it is based upon real asset flows into mutual funds. It is not an investor opinion poll. By tracking the money, we get to see how these investors are placing their market bets. The Rydex market timers represent a small segment of the investing world. Nonetheless, their actions remain a useful window into the mindset of investors.
The indicator for the most part tends to track prices. When there are too many leveraged bears, the indicator is below the green line, and we should expect a reversal in prices. This would be October, 2011. When there are too many leveraged bulls, the indicator is above the red line, and we should expect the market to “top out”. This would be April, 2012 and September, 2012.
But since the announcement of QE4 something interesting has been happening to the indicator. It is marking lower highs while price is making higher highs. In other words, the indicator is diverging negatively from price. The Rydex market timer is not buying the rally.
Divergence 2. SPY (black) v. Rydex Bull/ Bear Leveraged Ratio (red)/ daily
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Divergence 3 is between the S&P Depository Receipts (symbol: SPY) and the Currency Shares Austalian Dollar (symbol: FXA). Since the start of 2012, FXA has been making a series of lower highs while the SPY continues its march upward.
Divergence 3. SPY (blue) v. FXA (red)/ weekly
Divergence 4 is between the SP500 and a composite indicator that measures the trends in the CRB Index, gold, and yields on the 10 year Treasury bond. Essentially, this is an indicator that assesses how well the Federal Reserve is doing at re-inflating the economy. (See this VIDEO for details.) The red dots on the price bars are those times that the Fed is losing the reflation battle. Most of the red dots occur either at the end of a monetary operation (i.e., QE2) or at the start of a new one (i.e., QE to infinity). Don't worry, the Fed has its finger on the pulse of the economy. Presently and by this measure, the Fed is losing the reflation battle, yet the market continues higher.
Divergence 4. SP500 (blue) v. Reflation Indicator (red)/ weekly
Divergence 5 is between the S&P Depository Receipts (symbol: SPY) and the PowerShares DB US Dollar Bear (symbol: UDN). UDN is an ETF that goes in the opposite direction of the US Dollar. As the Dollar is devalued, we would expect the market higher. Or as UDN drops (i.e., Dollar higher), we would expect the market lower. Over the last 5 weeks, the Dollar and the equity markets have been going higher. Furthermore and since 2012, UDN has been going lower while SPY has been heading higher. Is this a measure of the increasing ineffectiveness of endless QE?
Divergence 5. SPY (blue) v. UDN (red)/ weekly
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The next "crisis" will hand them your retirement accounts as the sheeple beg for salvation. One pension to bind them all...
Dont forget Dr. Copper
I find it interesting that all the Bernanke "Kool aid drinkers" all speak with one voice when it comes to Government spending...namely "keep that Keynsian foot to the floor." I'm not an economist but took a few (very good) classes back in the day and I know of ZERO economic theorists (ESPECIALLY Keynes) who ever advocated this approach. In other words "money" and "scarcity" if not used in the same sentence is simply snake oil. The fact that Congress has never uttered such an axiom to the Fed Chairman about something so simple is not a good sign in my view.
We have the new "Modern economic theory " now. All that old fogie stuff is so yesterday. Haven't you heard we can just print the money we need. Of course the "we" I refer to is not you nor me but King Bernanke and his court.
Thanks for the contribution but there really isn't that much diversion to be significant in 1 to 4, imo. The inflows into mutuals and the general bullish market air is obviously qex.
5 is interesting. USD strengthening as the funny money is printed to pour into the S&P. Contrary to expectation perhaps, but not to those who believe in the miracle healing power of Dr.Ben's QE snake water. We saw a similar divergence in the early days of qe1.
The last of the bears have capitulated and the rest of the sheep are finally getting into the market - not a good sign. This "correction" will make 2008-2009 look puny.
Look hard. I bet you can find this stuff happening before....hmmmm
Buy the fucking dip I guess
Buy the rip too
Fuck selling until you see blood.
Fear not. The Central Planners will get round to fixing minor divergencies on a strict priority basis. Right now, the priorities are how to get this fucking Dollar to devalue when all the other CB's are on to the game AND at the same time making sure that PM's stay down.
Every indicator marks a period of time where it is broken- it no longer functions the way it is supposed to.
That which decouples- recouples.
In 2007, the DOW jumped to make it to 14,000 before the bottom fell out. This morning KNX was noting that the SP-500 was just points away from an all time high.
If you look at the sp-500 chart it is going PARABOLIC. The last greater fool is trying to get in the pool.
Questions, Questions, Questions. None of the described phenomena are statistically significant.
Mail me a check.
Holy Batman RSI divergence on the second chart. Grab yer buttplugs & sit on tight, because the next Stop-stop-stop-stop-stop-stop-stop... stop is a looong way down.
Didn't notice that RSI there but you're right, it looks worrying. Hitting that 1.03 RSI floor would take you to about 120 - 125 level maybe? If it breaks that I can't see much in the way of the lows. Brown trousers time....
Correct me if I'm wrong, but IBM is one of those stocks that determine market valuation.
http://fiatflaws.blogspot.com/2013/03/ibm-and-moving-moving-avg-of-volume.html