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Small Pair

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

With the markets such a tangled mess these days, I continue to rely on important, long-term ratio charts to appreciate the big picture. Here, once again, is the Russell 2000 divided by the S&P 500, which suggests to me that small caps are going to be in for a rough ride for many, many months.

The last time this happened, the pattern was well-formed but much smaller. It seemed weird to me that the point in the past corresponding to the point we are at now (analog-ish-ly speaking) was in the fall of 1997, well before the March 2000 peak. The small caps, however, had a tumble in store. I’ve marked the point (with a red oval) in 1997 where small caps were that equals where I think they are now. I think the much, much bigger pattern of today will make the move much more powerful, however.

Just to add another chart to the body of evidence, here is IWM (the small caps) divided by TLT (bonds), which is equally bearish.

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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