RATIO  ANALYSIS

Ratio analysis allows us to identify extreme market conditions. Since  most "turning points"   occur when market conditions  become extreme, ratio analysis can be rather useful in alerting  us  that a turning point may be near, and/or  to confirm  conclusions derived from  employing other technical methodologies such as  cycles analysis, price pattern analysis, etc. The ratios  discussed in this article  are some of the ones I  look at on a regular basis.

1) BPOEX:VXO  Since 2004,  readings  between 7 and 8.5 have marked "tops"  and readings between 3.5 and 2.5 have marked "bottoms." 

2) BPSPX:VIX  Since 2004,  readings  between 7 and 8 have marked "tops"  and readings between 3.5 and 2.5 have marked "bottoms." 

3) CRB:OIL  Since 2000,  "spikings"   have marked  all important "tops"  and  "bottoms in the price of oil.

4) DJIA:OIL  Since 2000,  "spikings"   have marked  all important "tops"  and  "bottoms in the price of oil, and in the DJIA.

5) GOLD:HUI  Since 2004,  readings  between 2.25 and 2.5 have marked "bottoms"  and readings below 1.0 have marked "tops." 

6) GOLD:XAU  Since 2002,  readings  between 5.0 and 5.5 have marked "bottoms"  and readings below 3.8 have marked "tops." 

7) NDX:IBB  Since 2002,  readings  between 22.5 and 23.5 have marked "bottoms"  and readings below 20 have marked "tops"  for biotech. 

8) SPX:OIH  Since 2006,  readings  between 10.5 and 11.0 have marked "bottoms"  and readings below 10 have marked "tops"  for the Oil Service sector. 

9) SPX:XLE  Since 2006,  readings  between 25 and 26 have marked "bottoms"  and readings below 23 have marked "tops"  for  Big Oil. 

10) SPX:QQQQ  Since 2003,  readings  between 31 and 30 have marked "tops"  and readings above 32.5 have marked "bottoms"  for  the QQQQ. 

Currently, all ratios are  near the middle of their most recent range, implying that the markets  in question are neither  at a  bottom, nor, at a top, and thus,  there is no compelling reason to be fully long, or, fully short.