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The Lost War

This is a syndicated repost courtesy of NorthmanTrader. To view original, click here. Reposted with permission.

) prints a negative divergence (a lower high) while the ratio prints a new high. All of these things have now again come to fruition.

Coincidence? Judge for yourself looking at the chart above.

What is clear is that the ratio broke its trend line in December for the first time since 2009. The 2 previous breaks marked the end of bull markets and brought about sizable bear markets. But note also that these bear markets experienced sizable bear market rallies first and I’ll use a chart of the Industrials ($XLI) here to illustrate the point:


Gold News Good News Bad News

The good news is that the 13 week cycle appears to have entered an up phase. And it did so before materially breaking the previous low. The bad news is that 9-12 month cycle indicators are showing no signs of strength early in this up phase. Here’s what it means, and a suggested trade.

It sends the same message as the CPI ratio chart: The war is already lost, no matter how desperate central banks are in attempting to re-inflate asset prices. The larger message I take away from this: Market strength is an opportunity to sell, especially considering that this rally remains untested, technically uncorrected and dovish central banks have now been fully priced in. But hey, perhaps it’s different this time. It has to be, otherwise the CPI ratio chart suggests new lows are coming.

Wall Street Examiner Disclosure: Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. No endorsement of such content is either expressed or implied by posting the content. All items published here are matters of information and opinion, and are neither intended as, nor should you construe it as, individual investment advice. Do your own due diligence when considering the offerings of information providers, or considering any investment.

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