What the markets are saying about the economy

It has been a while since I looked at the economy through the market's eyes.  Lets take a peek.

Here is a weekly chart of JJC (copper ETF).

I think the chart speaks for itself.  There is a potential head and shoulders top, but it has not been consummated yet.  Copper has diverged from SPX for more then a year with no clear sign of a new rally yet.

Here is a weekly chart of XLB (basic materials ETF).

This is also somewhat head and shoulder looking.  The right shoulder is considerably higher then the left, but the neckline is a perfect fit.  Currently XLB is testing its downtrend line from last year's high.  We will have to see if it breaks through here and invalidates the potential topping pattern.  It also has clearly diverged from SPX since last year.


Here is the weekly DJ20 chart.

 

The transports have also clearly diverged from SPX since last year.  They are currently under a clear down trend line.  This is a very sloppy chart.  No clear sign it is about to stage a break out to the upside, but no clear sign it is about to break down either.

Here is a peek at EEB (BRIC ETF).

This is possibly making a double bottom, but is far from clear on that.  It is still well below the down trend line.  There is a bit of sloppy looking head and shoulders topping pattern potentially forming going back to 2009.  It certainly is not clear that EEB has made an important bottom yet.

Here is the weekly chart of the SOX (semiconductor) index.

This index looks to be forming a triangle pattern.  A lower high and higher low have already formed.  In recent weeks there has been a pretty strong bounce, but no significant price level has been breached yet. This chart is very inconclusive on which way it will end up breaking out.  Like the other charts there is a significant divergence with SPX since early last year.

Here is a look at XLF (Financial ETF).

This chart is also forming a triangle pattern.  This chart has really been diverging from SPX since early 2010.  The 2011 peak was only a few cents above the 2010 high.

Last but certainly not least is the CRB commodity index.

Commodities have had a big rally from a very oversold condition in recent weeks.  The CRB is clearly in a down trend and even broke below last fall's low.  It has stalled at the underside of its 50 week SMA.  This rally has taken the CRB back above its low from last fall, but it has not done enough to say it has reversed into an uptrend. 

We have an awful lot of important indexes seriously divergent with SPX.  None of them have any clear signs they have started an uptrend.  The 2000 and 2007 tops had some divergences in these indexes, but it was nothing compared to this.  I think this is a good time to say buyer beware.

Bob