What The RSX Bear Market May Mean For SPX500

December 9, 2014

It has been a rough year for Russian stocks.

This is shown well by the Market Vectors Russia ETF in red and especially against the volatile but upwardly moving S&P500 in blue.

When some time is taken to study this chart, however, it is clear that the true divergence between RSX and SPX happened in mid-October when the S&P 500 was stoked higher on a new round of Abenomics as Russian stocks tanked on crude’s plunge.

Now perhaps it is possible to believe that the world’s top economy and stock markets are isolated and protected from what’s happening to stocks of the world’s 8th largest economy, but the XLE may suggest otherwise.

energy select spider rsx downAs can be seen in the long-term weekly chart to the left updated through the end of last week, Energy Select Spider ETF (XLE) is tracking RSX down on the crude connection.

My chart analysis suggests the XLE has more work to do to the downside as does RSX and it is challenging to think that the S&P 500 will remain unaffected by those respective bear markets for too much longer.

December 9, 2014                                                                                                       

This is particularly true considering how well RSX, XLE and SPX tracked each other until 2011’s Operation Twist, QE3 and even more truly the advent of Abenomics.

Perhaps the effects of these central bank programs will continue to keep a wedge between Russian stocks and U.S. stocks, but this is probably only true on some sort of recovery in the price of crude oil and something that seems unlikely considering its break from long-term support as discussed in last week’s Crude, Copper and the S&P500.

It may be more realistic, then, to consider that the bear market in RSX may mean something similar for SPX.


Courtesy of http://www.peaktheories.com

*Disclosure: I own securities that reflect a short position on Russian stocks.


Peak Theories Research LLC (“PTR”) is not a registered broker-dealer and PTR’s reports, including Peak Prospector, do not constitute recommendations to purchase or sell any securities and do not involve an offer to sell or a solicitation of an offer to buy any securities discussed in any PTR reports.  Opinions expressed herein are strictly that of the author and are subject to change without notice and may differ or be contrary to the opinions or recommendations of any professional associations held by the author.  The opinions contained herein should not be taken as specific recommendations to be acted upon.  Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price.  No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness, reliability or appropriateness of the information, methodology and any derived price contained within this material.  The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.  The author may have or have had interests long or short positions in the securities or related financial instruments referred to herein, and may at any time make purchase and/or sales in them.  Neither the author or any person or entity related to the author nor the author’s professional associations accept any liability for any loss or damage arising out of the use of all or any part of these materials.

US silver mining began on a large scale with the discovery of the Comstock Lode in Nevada in 1858.