Intermarket Analysis: U.S. Equities Correction Getting Nasty

Intermarket analysis is simple.

We measure two assets against each other.  We want to see the riskier asset trending higher in bull markets. 

When we look through many intermarket charts today; they are not. 

Stocks vs long term treasuries continued their move lower and are further breaking the bull market uptrend.  This was prime for some reversion and we just didn’t get it.

stock market correction analysis spy tlt ratio chart image march year 2020

High Yield relative to Corporate bonds also broke down further below the 2009 low this week.

hyg lqd debt ratio risk stock market correction bearish indicator image_march year 2020

The consumer ratio failed to confirm the entire 2019 rally.  It’s been a long lasting divergence and just recently it broke down.

consumer discretionary staples etf sector ratio risk stock market correction_march year 2020

Utilities relative to the S&P 500 has trended lower for a decade.  Now it’s broken a 1 year range higher and is testing the broadest the trend into Monday’s open (at the time of writing futures are limit down (5%) and this appears to be set to break out.

utilities to s&p 500 index ratio chart image risk stock market correction bear_march year 2020

Obviously, these tools aren’t timing tools.  Say what you will about that, but the broad strokes message is bearish and has gotten substantially more negative in recent weeks.

These are big picture signals.  So if you’re tactical and think the market is going to hold the recent low area, consider shortening your time frame.  If you’re an investor, you may want to consider saving some of that dry powder and/or figure out a plan for raising cash into rallies.

Thanks for reading.  Trade ‘em well.

Twitter:  @ATMcharts

Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

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