Today was the last trading day of the month. Let's take a look at the where the monthly charts stand to asses the BIG picture. A few interesting developments occurred...
The S&P 500 spent over a decade consolidating the massive 1982-2000 bull market, before breaking out from the green line and resuming the bull market. The RSI on the monthly chart is also strong.
Yes, a consolidation here would be healthy but consider that we have 2 bullish cyclical trends in 2015:
- Presidential Cycle. The 3rd year is the most bullish of the four, with 16% avg. gain and 88% positive years
- Decennial Cycle. Years ending with a "5" (eg. 2015) have historically performed better than the other 9, with a 21% avg. gain and 83% positive years.
The USB (30-year treasury bond) monthly chart is shown below. Bonds have been in a 30+ year bullish channel. But now there are signs that this channel can roll-over. Notice how the RSI is showing bearish divergence. We are also right at RSI resistance (blue line).
A few months ago, the USD broke out of a 10-year base. It can consolidate here, but the big picture is healthy for the dollar. This is bad news for commodities & foreign currencies.
This month, the YEN just broke a 30-year topping formation with bearish RSI divergence. As bad as the decline over the last 2 years has been, there could be a lot more downside left. This is good news for the Nikkei, but bad news for Gold.
Gold broke a 14-year uptrend a few months ago. Today, the monthly chart closed below an important support line. The big picture is bearish for gold.
At the same time, GDX also closed below an important 20-yr support line. Notice the long-term bearish RSI divergence.
We've looked at asset classes in isolation above. Now let's look at ratios between asset classes.
The SPX:EEM ratio shows a huge rounded bottom base with bullish RSI divergence. As we've shown before, this ratio has a strong inverse correlation with GDX.
Similarly, the SPX:GOLD ratio has also formed a long, rounded bottom with bullish RSI divergence. The base has broken out in recent months.
The monthly charts above show a long-term bullish picture for US equities and the Dollar, but a bearish picture for Treasury Bonds, Yen and Gold. This is confirmed with ratio charts.