Performance Divergences that Make You Go Hmm…

There was a serious shift over the last five weeks as commodities surged, bonds fell and the Dollar recorded new lows. There were also some noticeable divergences as the Inflation-Indexed Bond ETF (TIP) edged higher and the 20+ Yr Treasury Bond ETF (TLT) moved lower. This divergence is only five weeks old, but it does suggest a whiff of inflationary pressures in the air.

The PerfChart above shows TIP with a .75% gain since October 30th and TLT with a 1.5% loss. We can also see the commodity ETFs surging with the DB Agriculture ETF (DBA) gaining 5%, the DB Base Metals ETF (DBB) advancing 12% and the DB Energy ETF (DBE) surging 18%. Meanwhile, the Gold SPDR (GLD) does not care about a falling Dollar or rising commodity prices…yet.

There is also an interesting short-term divergence between gold and silver. GLD is down 2.2% the last five weeks, but the Silver ETF (SLV) is up 2.2%. Perhaps the industrial side of silver is starting to shine. The price chart is also shaping up bullish as a key outside reversal formed this week and RSI bounced near 50.

A KEY outside reversal forms when the open is below the low of the prior bar and the close is above the high. This shows a serious shift driven by strong buying pressure after a weak open. RSI tends to range from 40 to 80 in uptrends and this makes the 40-50 zone support for momentum. The key outside reversal and momentum support zone mean we should be on alert for a follow through breakout.  

Looking for more trend analysis and bullish setups for ETFs? This weekend we identified six ETFs with short-term bullish continuation patterns, two with medium-term bullish continuation patterns and two mean-reversion setups. Each week TrendInvestorPro offers a comprehensive pattern and setup report with annotated charts as well as a ranking report that tracks trend and mean-reversion signals for over 100 ETFs.

Click here to take your analysis process to the next level!

Try our Premium content!

Premium content is geared towards traders and investors
looking for a systematic and objective approach.

-Arthur Hill, CMT
Choose a Strategy, Develop a Plan and Follow a Process