Chart of the Day – Russell vs. S&P 500, More Evidence the Top is In

by Enis October 26, 2012 2:06 pm • Commentary

I posted the Nasdaq 100 vs. SPX index on Oct. 19th, going back 3 years, and posited that it was evidence that the market had put in a major top.  Here is another chart that offers supporting evidence that the S&P 500 put in a major top:

 

 

It is a bit hard to read, but it shows the SPY / IWM ratio over the last 3 years.  Generally, periods of risk-on have involved the IWM (small caps) outperforming the SPY (large caps).  I’ve written about this ratio before.  Interestingly, the ratio bottomed in the spring of 2011, and now trades at a level similar to the fall of 2011, when the SPX was around 1100-1200.

In other words, the risk appetite of major fund managers is much lower than where the overall level of the SPX index would indicate.  It might be another long-term sign to hunker down the hatches.