Broker/Dealer Correlation

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The broker/dealer index has recently exhibited an interesting behavior when it gets to about $109.70; it tends to slump afterward, and it carries the market with it.

The broad market and the $XBD used to move totally in synch, but thanks to Federal Reserve perversions and distortions, the SPY inhaled a lot of helium around September 2010 and has been much more prone to rises than $XBD ever since. In spite of that, the gravitation pull is still very present. Take note:

0211-xbdSPY

The green tint shows when the $XBD hits resistance, and the magenta tint shows that point in time on the SPY (which, in the past two instances, preceded a big tumble). We are getting very close to the line again on $XBD, so it's worth noting. (As if – heh – anything, including a worldwide nuclear confrontation, would cause a market drop lasting more than 30 minutes. Ho! Ha-ha!)

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