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



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.



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?




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



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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