When the S&P500 Outperforms Lumber by 60% in a 1-3 year time window, it has tended to mark important stock market peaks in 3 of the last 4 instances.
The first was in 1995 and the stock market was in a full fledged blast-off stage and didn't look back, but the next 3 signals led to a 12% drop, then the 2001 peak and the 2007 peak in the equity market.
Who knows if the current 750 batting average will hold up, but it is interesting.
Keep in mind the "New Fed Chairman" batting average is 800 (80% correct) for lower "real" stock prices 5 years after a new Fed Chair takes over... see links below.
Have a great weekend.
Tim
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Time for an update - it's been a year
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It appears as if we are repeating the pattern from 1998 where there was a market reaction from the S&P/Lumber ratio, which we have had already earlier this year. Back in 1998 we were building the internet bubble which still had 1999 and up until March 2000 to finish.
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IvanLabrie
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These are really interesting patterns you've found, fundamentally backed technical analysis.
You'd think it's common sense, since, hey, real life events should move markets and not some arbitrary chart formation, right?
Yet we're all so focused on spotting our favorites setups that we miss the big picture.
Thanks for sharing these insights here Tim.
IvanLabrie
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4 out of 4.
paulyberndt
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Interesting. Thanks I think there was a guy on marketwatch making this argument a while back too
claydoctor
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Does the difference of separation relate to the degree of correction back toward each other? i.e. the base of the VIX forming before a major spike 2001 and 2008. ?? Great chart as always.
ChimbOt
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Tim , what an interesting correlation
You have the eyes of a hawk.
Good stuff, Helps confirm my short bias even more!
UnknownUnicorn121770
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Thanks for commenting you're short. Also helps confirm my bias!
G13Man
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at the rate u are finding correlations on dif charts , you will be well !
plus 1
juanclos
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1.4 level to watch with strength, if so this is not the time, as long as sideways action keeps, there is clear happening now.
themarketzone
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Interesting point of view. Wouldn't think of it. Thanks
smitheric1970
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Great chart Tim. Thank you. Gold seems to have been outperforming lumber recently as well, do you feel this is relative?
You'd think it's common sense, since, hey, real life events should move markets and not some arbitrary chart formation, right?
Yet we're all so focused on spotting our favorites setups that we miss the big picture.
Thanks for sharing these insights here Tim.