Friday, May 24, 2013

QE Betaflation Hasn't Benefited $XAX (NYSE MKT Composite), $SPY/$XAX, $SPY/$IWM - Must See Ratio Charts

Remember when I posted about the NYSE MKT Composite Index ($XAX) in April? This index of small and micro-cap stocks (mostly illiquid) has been bumping up against 2007 resistance since the beginning of 2011. But the reason why this index is so interesting is because these betaflationary forces created by the Fed's monthly QE purchases haven't benefited these stocks for over two years. Look how $SPX/$XAX and $SPY/$XAX have gone parabolic recently as a result of the S&P's recent spike. This is the S&P priced in small- to micro-cap stocks. So either the majority of these small companies/stocks haven't benefited from the Fed's stimulus since early 2011, or they were just too risky and turned into penny stocks (click the charts for a clearer view courtesy of stockcharts.com). See my previous post from April for more info on the NYSE MKT Composite Index. I embedded a Youtube video of a listed company's CEO being interviewed on the floor of the NYSE.

First, take a gander at $XAX (NYSE MKT Composite, formerly AMEX Composite), SPY/$XAX (the S&P ETF/NYSE MKT Composite), and $SPX/$XAX (the S&P 500 Index/NYSE MKT Composite).

It's been game over for $XAX since its initial breakdown. I guess it might have a chance in its multi-year ascending triangle, but time is running out. It keeps getting knocked down at 2007 resistance.




$SPX/$XAX looks a little different, but you can see that it's at the 2007/2008 highs and overheating a little bit.


Now look at SPY versus IWM, the Russell 2000 Index ETF of small-cap stocks, since the beginning of 2011. SPY didn't outperform IWM by much. But SPY/IWM could see a major move soon in that multi-year symmetrical triangle



Lastly, look at SPY/$XAX versus SPY/IWM since October 2007, the beginning of the previous bear market. SPY/$XAX is up 20% while SPY/IWM is down 4.99%! Can anyone explain what is going on here? (Text on the chart should say 4.99% not 4.93%.)

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