Tuesday, March 13, 2012

Big Day!

I was busy the entire day and could only follow the market intermittently on my smart phone.  I checked into a hotel in Houston and they didn't have CNBC?!  Who doesn't have CNBC???  

In any case, I didn't need CNBC to tell me what I already knew and what I've been posting for weeks.  Treasuries broke down out of their short term support zones and stocks took off to the upside.

Gold took another beating on a higher US Dollar but I believe there is more to this story than just the traditional correlation.  I'm thinking thru my thesis on the yellow metal and also considering whether the inter market relationship between the Dollar and equities may be changing?

The only concern I continue to have with this rally is one I identified in my commentary on Sunday:


This is a ratio chart of the Rydex S&P Equal Weight ETF divided by the S&P 500. For those of you who need an explanation of the chart go to my commentary of 3/9 on this blog.  Even with today's surge in the indices the bulk of stocks in the S&P 500 are not participating in the present rally. 

The two panels below the main chart are price relative ratio charts of the Russell 2000 divided by the S&P 500 and the Nasdaq Composite divided by the Nasdaq 100 (the top 100 equities in the Composite based on market capitalization).  We would want to see strength in the Russell and the Nasdaq Composite relative to the larger capitalization stocks but we are not seeing it.

This state of affairs must change soon if this rally is going to be sustained on an intermediate to long term  basis. 

But enjoy the ride while it lasts.  Next stop on the S&P is 1440!