One of our market trend confirming indicators is the ratio of copper prices to the long-term US Treasury Bond. A rising ratio suggests optimism for economic growth, given the significant role that copper plays in the world economy. A decline in this ratio suggests economic weakness (weaker copper prices and stronger bonds cause the ratio to fall faster).
In the chart below, you will see that the copper/bond ratio has settled back to long-term trendline support. Note that setbacks have preceded declines in the S&P500. In fact, this ratio, which broke through resistance marked by highs in 2006, 2007 and 2008, has settled back to that support line (former resistance), and bodes watching:
A second curious kink in the uptrend is the appearance of divergence in the S&P500. We like to see RSI (the Relative Strength Index) turn higher and make new peaks alongside new peaks in the equity index. as the chart below demonstrates (see the red circle in the RSI section at the top of the chart), RSI on a weekly basis (more meaningful that a daily chart) has been trending downward as the S&P500 index has been climbing:
Other indicators generally support the uptrend. With the strong surge that equities have experienced, however, these two kinks in the uptrend potentially foreshadow a breather for the uptrend. The emergence of additional negative indicators will signal more cause for concern.
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