IWM Relative Strength vs SPY: How the Ratio Line Predicts Price Moves

 

Above is a 60-minute chart of IWM, and in the lower pane I have the ratio line comparing IWM to SPY. This is a great example of how the ratio line can often act as a leading indicator, tipping off potential moves before price makes them obvious.

Let’s start with point A. At this point on the chart, the ratio line had already broken down to a new swing low even though price had not yet done so. On the surface, IWM still looked relatively stable, but under the hood it was already starting to underperform the broader market. Shortly after that breakdown in the ratio line, price gapped lower and then proceeded to trend down over the course of the following week. The weakness was signaled in advance by the ratio line, long before most traders would have reacted to price alone.

Now look at point B. Here we see the opposite scenario. The ratio line broke out to a new swing high well before price followed. I’ve drawn vertical dashed lines so it’s easy to see where price was at the exact moment the ratio line was already breaking out. While price still appeared range bound, relative strength was quietly improving. Not long after, price exploded to the upside. Once again, the ratio line led the move and gave an early heads up that conditions were shifting.

Now let’s fast forward to where we are now at point C. A few days ago, the ratio line once again broke down to a new swing low, but price has not yet confirmed it. This divergence suggests pending weakness. It doesn’t guarantee that price must move lower, and it certainly doesn’t tell us when, but it does tilt the odds in favor of the bears.

From here, what matters most is confirmation. If we start to see key support levels taken out in the coming days, I would expect price to eventually follow the ratio line lower, just as it has in the past. This is exactly why I rely so heavily on relative strength. It doesn’t replace price, but it often whispers the story before price shouts it.

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RDW: Watching a 6-Day Cycle and Support Confluence for a Potential Bounce

 

Above is a 60-minute chart of RDW, and what has my attention is an interesting cycle rhythm that has been developing over the past several weeks. Markets often move in cycles, and in this case RDW appears to be respecting an approximate six day rhythm. If you step back and look at the swings, you can see that rallies have been showing up roughly every six days, almost like a pulse running through the chart.

That’s important because we are now right at the point in time where if this cycle continues to assert itself, a rally could be due. Based on the prior rhythm, the window I’m watching most closely would be Monday, or Tuesday at the latest. Timing alone is never enough to take a trade, but it does tell me when I should be paying closer attention.

From a price perspective, we also have some interesting confluence. RDW is currently sitting near the bottom of a channel, an area where price may find support. Just below current levels there is also an open gap, which can act as a support zone. When time and price line up like this, it gets my attention. It doesn’t mean a trade is guaranteed, but it does mean the risk-reward may soon become more attractive.

At this point, there are no buy signals. I want to be very clear about that. I’m not anticipating blindly or trying to predict the market. Instead, I’ll be watching for the market to tip its hand. That could come in the form of a bullish reversal candle such as a hammer or an engulfing pattern, a trendline break or possibly signs of improving relative strength versus the overall market.

For now, RDW is simply on my radar. If the cycle rhythm holds and price responds to these support areas, I want to be ready to react. As always, the goal is to stay patient, let the market confirm the idea, and only act when the evidence is there.

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A Classic Case of Relative Weakness: Why I’m Watching TEM on the Short Side

 Here’s a stock I’m watching closely for a potential short, and it’s a great example of why I always keep relative strength front and center in my analysis. Above is a 60-minute chart of TEM. In the middle pane I have the SPY for market context, and in the lower pane is a ratio line comparing TEM to SPY. Right away, the message from the chart is clear.

The SPY is pushing to a new high, yet TEM is doing the exact opposite. Instead of confirming the market’s strength, TEM is making a much lower high. This is a textbook example of relative weakness. When the overall market is strong and making new highs, but the stock you’re watching can’t even keep pace, that should immediately grab your attention. To me, that’s the market quietly telling you where money is not flowing.

The ratio line really drives this point home. It’s been in a clear downtrend, and more importantly, it has already broken down to a new swing low before price has done the same. This is one of the biggest clues I look for. Relative weakness often shows up in the ratio line first, and price tends to follow later. When I see the ratio making new lows ahead of price, I start thinking in terms of downside risk rather than upside potential.

As far as execution goes, I’m not interested in guessing. What I want to see is confirmation. In this case, recent support sits around 61.55. A clean break below 61.50, in my opinion, could open the door to continued weakness in the days ahead. That level is important because it represents the line in the sand where buyers have previously stepped in.

What makes this setup even more compelling is the broader context. This weakness is occurring while the overall market is rising. If TEM can’t hold up in a strong market, just imagine what might happen if the market starts to roll over. That’s why I’m keeping this one on my watchlist. For now, I’ll stay patient, wait for support to break, and let the market confirm the short before taking action.

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MSOS Chart Update: Watching for a Potential Bottom as Lower Highs Continue

 Well, the waiting continues for me as MSOS makes yet another lower daily high. This marks the fifth consecutive lower high, and it has me on alert, watching carefully for a potential long entry. It’s hard not to notice the similarity to November 20th, when we saw a comparable setup. Back then, MSOS also made consecutive lower daily highs, and that series of highs ended up marking a significant low. That historical context is why I’m particularly attentive this time around.

Volume has been shrinking over the past several days, which is understandable given the holiday season. Low volume is expected during Christmas, but it still tells me something important, the market is slowing down, consolidating and getting ready for its next move. We’re still within the gap area which I feel will act as a large zone of support. This is one of the reasons I expect MSOS to put in some kind of bottom any day now.

Another point I’m watching closely is the presence of back to back inside days. This pattern signals a slowdown in momentum and often precedes a more decisive move. I like to see this type of action as a potential setup for a directional trade. Personally, what I’ll be looking for is a break above the mother candle’s high at $4.87. If MSOS can take out that level, the next key spot will be $5, which I consider very important. Reclaiming that mark could signal a meaningful shift in sentiment.

Of course, I’m aware that plans don’t always unfold the way we hope. As Mick Jagger famously said, “You can’t always get what you want.” That’s something I keep in mind every time I sit in front of the charts. My approach is to take it one day at a time, reacting to the price action as it develops, rather than trying to force a trade.

We also have the bullish seasonal kicking in next month, which adds another layer of anticipation for me. Overall, my plan is clear, watch for a bottom, monitor the inside days, and wait for a breakout over $4.87 before considering a long entry. For now, patience is the key, and I’ll let the market reveal its next move.

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What Bitcoin’s Relative Strength Is Telling Us About Liquidity Flows

 I’m seeing a lot of chatter on social media lately about Bitcoin being “cheap” and a must buy right here, but based on what I’m seeing, I have to disagree. When I step back and look at Bitcoin through the lens of relative strength, the evidence suggests money is leaving the space, not flowing into it.

Above is a 60-minute chart of GBTC, and in the lower pane I’m using the SPY as a benchmark. This comparison is important because relative strength isn’t about whether something is going up or down in isolation, it’s about how it’s behaving compared to where money could be going instead. What stands out to me is that while the SPY has pushed to a new swing high, GBTC has failed to do the same. Instead, it’s carving out a clear series of lower highs.

That’s a major red flag. If Bitcoin were under accumulation, especially during a strong stock market environment, you wouldn’t expect to see persistent lower highs. Strong assets tend to confirm strength elsewhere, not diverge from it. When equities are attracting capital and Bitcoin can’t keep pace, it tells me liquidity is favoring stocks over crypto, at least for now.

This is why I’m always focused on liquidity flows. Markets move based on where capital is rotating, and right now, I don’t see convincing evidence that money is rotating into Bitcoin. Belief and narratives don’t move markets. capital does.

From a tactical standpoint, the level I’m watching is 67.50 on GBTC, which represents minor support. If that level is taken out, it would get my attention and increase the odds of further downside. Until then, I’m staying on the sidelines. The warning signs are there, and patience is a position.

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