BullBear Trading: Stock and Financial Market Technical Analysis

Midcaps to Big Caps Ratio Confirms Bear Market

Here's yet another technical study which shows that we have been in a bear market since early 2011:

I'd been noticing relative weakness in the Midcaps so I decided to have a look.  Mids cleanly outperformed SPX since the 2009 bottom but the ratio topped in April 2011, making a secondary lower high in July 2011.  The bounce off the 2011 low was weak and a substantially lower high was registered in February 2012 creating a divergence from the new high in SPX.  This was followed by a triple bear cross which coincided exactly with the April price top.  The ratio is leading the market lower, making a lower low for the move off the April high and threatening to take out the 2011 low very soon.

  

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Comment by Max on June 28, 2012 at 10:47pm

Steven, could you explain why the ratio of Midcaps and Big Caps is significant in technical analysis? Thanks.

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