The Return Of Divergence

Well, here we go again.

The central bankers (this time, by way of Draghi) have jawboned the market into another explosive rally. I’d like to point out something that may be of interest to you, however. Kindly look at the chart below:


The black line is the SPY (in other words, the S&P 500. The blue line is the high-yield fund ETF.

During the summer, an enormous gap grew between these two, which I’ve highlighted in red. Eventually – – and it took far too long for your impatient host – – this divergence “resolved” with the S&P crashing to the downside.

Since that is, of course, an unacceptable reality – – – rotten earnings be damned – – the S&P is aloft once again, and sharp-eyed viewers may notice that the gap is getting chasm-like once more.

Food for thought.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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