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It is amazing how technical analysis - routinely dismissed by so many respectable types as being hocus pocus - so often paints a picture of symmetry, of things eventually 'coming out in the wash', if only human market managers would listen to the uncaring message.
I know many people (including me) think there are evil doers out there manipulating markets, manipulating sentiment, manipulating the media, etc. But way too often, the stories that a patient chart reader can read help tune out all of that noise. If the markets are so manip'd, so evil... why are we here? We are here to make money - or at least that stuff they over print and call money - so that we can convert it to things of value. Charts, esp. when used in innovative ways, do generally work if one is able to incorporate and not over do a simple and consistent formula that works. Although the folks who just can't get that will never be convinced. Hey, it's what makes a market.
The symmetrical message of this chart is simply (and here comes what chart haters well, hate, the if/then statement) that if the EEM tops out, then soon too should the SPX if the dynamic that produced the cyclical bull market remains intact. That dynamic was of course, an epic crash and emotional reset. The best charting does not try to taunt as I see some trend following bulls now doing to the lowly bears. It does not try to put the fear of god into you when you should be thinking about being brave. It simply offers parameters and lets you consider them, with actions or reactions at the ready and as appropriate.
As for the current situation, if the EM's are topping out - and a look at daily charts of the likes of EEM and FXI shows a real mess in the making - then this is a bad omen for the S&P laggard. Taking it a step further however, with global inflators on the job 24/7 protecting us from lower prices, we cannot rule out that this would simply be a healthy correction along the way to higher levels in global markets, as the "global leveling of the playing field" (that's Jonathan's quote, he's in Africa and quite busy, so you'll have to put up with me opening the blog each morning for a while ;-)) continues.
But we'll just have to wait and see what the nominal charts say, what the ratio charts say, what's going in with sentiment, with media, etc. Then, we will once again have some parameters and early indications. In a rigged game, what more can you ask for?
