Small is the new Big- Russell 2000 now facing historical resistance!

russell2000smallisthenewbigfacingresistanceapr9

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The Power of the Pattern shared last October that the Russell 2000/S&P 500 ratio was on multi-year support, as small caps had been weaker than large caps for the prior 10-months. The ratio on support was suggesting this pair trade- Long Russell 2000/Short S&P 500.

The lower right inset chart reflects that Small Caps have out performed large caps by nearly 11% in the past 6 months.

Below is an update on the Russell 2000/S&P ratio. As you can see Small has been the new big since October. Now momentum is getting lofty.

russellspyratioupdateapr9

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Key to the top chart…The Russell 2000 is now facing a very key resistance test above, tied to its highs in 1998 and 2007, with the Russell/S&P ratio reaching lofty levels.

What the Russell does at this resistance line could tell us a ton about where Small Caps could be months from now.

 

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China blasting off, Doc copper lagging, what gives? Should we care?

performancefxijjcapr8

 

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I wish I had a Dollar for every time I heard that China can’t do well if Copper isn’t moving higher.

Over the past 6 months, China ETF FXI is up 28% while Copper ETF JJC is down over 10%. This is nearly a 40% performance spread in the past 6 months.

Yes this is just a 6-month snap shot. What about the past year? The spread over that time frame is over 45%.

I have found over the past 35-years it can pay to “Follow the charts and Not your heart!”

 

 

 

Holy Cow – Get a load of this monster breakout

shanghaiindexholycowdualbreakoutapr8CLICK ON CHART TO ENLARGE

This chart takes a look at the Shanghai Index over the past couple of decades. As you can see, this index remains inside of a well defined rising channel over the past 20-years.

From 2007 to 2014 this index had little to brag about, as it lost about two-thirds of its value in that time frame. The large decline took the index from the top of this channel (resistance) to bottom of this channel (support) in a 5-year time frame. The index broke above a 4-year falling channel on a breakout above line (1).

Two different resistance lines came into play at (2). The Shanghai index paused at this resistance for 2 months before breaking out at (2).

Earlier in the week the Power of the Pattern shared the 6-pack below, reflecting that several ratios involving this region of the world were breaking down. See post HERE

ratioasiaemergingbreakdownsapr6

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Five of these six charts are ratios. When the ratios are moving up, the S&P 500 is stronger compared to each of these ETF’s. The upper left chart (SPX/FXI ratio) is breaking support, which reflects that China is reflecting relative strength against the S&P 500 that we haven’t seen in the past 5-years.  As you can see, several of these ratios are working on breaking support, reflecting strength of the ETF over the S&P 500.

The lower right chart reflects a breakout from the bullish ascending triangle that CQQQ has created over the past couple of years.

Full Disclosure- Power of the Pattern suggested that Premium Members either own the Long FXI/SPX pair trade or own FXI our right. This trade has been suggested for the past couple of weeks. If would like to receive this type of research daily, I would be honored if you were a Premium Member.

 

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