Many months ago, I started tracking the chart for ($SPX/FR:DGS10) which is the S&P 500 cash index divided by the 10-year yield. The result was a fascinating and very clean channel. I noted with concern that this ratio has plunged to a perfect touch-point with the channel’s midline around March 18th, which suggested stronger stock prices ahead.
Well, that’s precisely what happened, as you can see. There was a wobble here and there, but generally speaking stocks have done little but ascend for the past four months, making lifetime highs practically every day, including today.
I would like to suggest, however, that this powerful bounce may be nearing an end. I’m not sure precisely where the horizontal line I’ve drawn below should go – – – but my point is that the pent-up energy from this midline touch has been largely expended.
