The relative ratio of the World Ex-US index versus the S&P 500 is on the verge of breaking out of a 16-year downtrend.
Here’s the chart:
Let's break down what the chart shows:
The blue line shows the relative ratio of World Ex-US versus the S&P 500 Index.
The Takeaway: The US has been outperforming the rest of the world for a long time. However, since the beginning of the year, the ratio of the World Ex-US index versus the S&P 500 has been ripping higher and is now on the verge of breaking a 16-year downtrend.
Let me break down the favorable changes I have seen happen to this ratio over the past 3 months:
The ratio is now above both its 50-day and 200-day moving averages.
The slope of the 50-day moving average is trending upward.
The RSI is above 80, the highest RSI reading this ratio has ever reached.
This is not enough evidence to confirm a trend change. So, for me to confirm that the trend has shifted in favor of the World Ex-US, I need to see the following:
A decisive move higher above the 16-year downtrend line.
A breakout above the support and resistance level from 2024.
The 50-day moving average crossing above the 200-day moving average.
Until I see this confirmation, the trend will continue to favor the US.
Is it finally time for the World Ex-US to start outperforming? Or will this be yet another failed attempt, similar to the five previous ones over the past 16 years?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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