Let’s take a quick look at the Cross-Market or Intraday Intermarket Landscape which sends a crystal clear signal for the stock market.
Of course, the stock market could blatantly ignore the signal but let’s at least listen to the message:
In this chart, we’re seeing the S&P 500 ETF (SPY) which is colored Green along with Gold’s ETF (GLD – yellow/gold) and a leading crude oil ETF (USO – black).
What’s going on?
Generally (although of course not always), commodities and stocks tend to trend (move) together as money flows into “Risk-On” or offensive assets.
We saw steady movement as stocks and oil rose together over the last week, but look closely at May 23.
Gold (GLD) actually peaked a day earlier on May 22nd ahead of its breakdown and collapse while Oil’s ETF (USO) peaked the next day on May 23 ahead of its sharp decline today.
What happened to the SPY/Stock Market? It continued to rise into new all-time highs today.
The warning sign comes from commodities forming a short-term peak and sharp reversal while stocks continued trading higher as if everything was perfectly fine behind the scenes.
Not only did “Risk-On” markets fall, “Risk-Off” or Defensive Markets rose with stocks:
This time we’re seeing the S&P 500 ETF (SPY – black in this chart) along with the US Dollar Index ETF (UUP – lime green) and the 20+ Year US Treasury ETF (TLT – red).
We saw treasuries (TLT) decline throughout the week, only to BOTTOM and reverse up on May 22nd (the same day gold peaked).
Note the very sharp or steep rise in the red line TLT Treasury ETF as it makes new chart (intraday) highs along with stocks at all-time highs.
The US Dollar Index has stealthily been creeping higher as generally the Dollar Index trades inverse (the opposite direction) to both commodities and the US Stock Market.
While money may continue flowing into stocks blindly as if nothing is wrong – and yes, that is a possibility – the message from the short-term intermarket or cross-market chart is clear:
Risk-On Gold and Oil are falling sharply while Risk-Off Treasuries and the US Dollar are trading rapidly higher.
This should not bode well for the stock market (but I’m not entirely sure that the bulls care).
For more daily updates from Corey, visit his blog at Afraid to Trade.com.