Home » Market Divergences Are Growing Insanely Wide

Market Divergences Are Growing Insanely Wide

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I must say that writing these days is a real challenge, and today’s one of those days, mostly because it was just more of the same with the troubling three continuing to lead the charge.

There is just nothing else to say there.

Is it a rising wedge that is forming in the S&P 500? It looks like one. Does it mean anything? Not sure. The definition of a rising wedge is a bearish pattern that begins wide at the bottom and contracts as it moves higher. So, it fits that definition.

On top of that, we have divergences all over the place, most notably in the dollar. It has certainly been the case when looking at the inverse of the Swiss Franc.

The inverse of the 1-month implied correlation index is also going in the opposite direction of the S&P 500.

Meanwhile, there has been a divergence between the S&P 500 and HYG junk bond ETF.

There used to be a time when reserve balances even mattered, and to this point, those have stopped going higher as well.

Financial conditions have even stopped easing.

Even the number of stocks above their 50-day moving average has been diverging.

So, unless the equity market has figured out a way to decouple itself from rates, the dollar, financial conditions, and everything else, the insanity of the last four months should be about over. I have nothing left to add.


Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.