Divergences on Stock/Bond Ratio have a good record of predicting falls/rises on the XJO. (Stocks/Bonds Chart tends to correlate inversely to the XJO.)
Below is a ration chart of Stocks/Bonds with some key situations marked on the chart.
1. On the chart Stocks/Bonds I've marked a double bottom which occurred late June into late July 2012.
2. A double top for Stocks/Bonds early October to late October.
3. Small double bottom on late December.
4. Current divergence for the current period. 8 March to current time.
Below is what happened in the XJO corresponding to those times:
Before the current time, we've had three divergences on the Stocks/Bonds Chart from the XJO chart. In each three times, a change in trend occurred.
Currently we have a divergence on Stocks/ Bonds, and XJO has come down a little this week. That doesn't seem to be enough to write off the current Stocks/Bonds divergence.
I'm expecting more downside after we digest the upside lead from the U.S. on Friday night. SP500 up >1% on Friday night.
RB
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