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Early Warning

I shared this chart on StockTwits and Twitter last week. It is one of the charts I like to watch and it is providing some early warning that we’re getting closer to a top.  In the past when the ratio between the S&P 500 index equal weighted (SPXEW) and the S&P 500 index (SPX) has fallen below its 20 week moving average it has signaled a top.  This measure is often early and sometimes wrong, but still something to keep in mind.  At the minimum it is providing early warning that money is moving into the the stocks with the largest market capitalization which often happens when money managers are moving to what they consider safer stocks.  If more signs of a flight to safety show up in the coming weeks we’ll most likely see a correction of a larger magnitude than we’ve seen in the past year.

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