Chart of the Day - Friday, July 23rd, 2021

Today’s Chart of the Day was shared on Twitter by Andrew Thrasher (@AndrewThrasher). It's a chart of the S&P 500 over the past three months, along with four important risk ratios below. The week ended on a high note, with the S&P 500 closing at a record high. While the S&P drifts higher, several key risk ratios continue to diverge, suggesting caution is warranted. Andrew points out that Small-Caps ($IWM), High Beta ($SPHB), and Equal-Weight ($RSP) are all still deteriorating on a relative basis. These divergences suggest narrow leadership and a waning risk appetite. When it comes to divergences, legendary technician, Martin Pring once said it best; "A divergence is like a weather forecast of rain. When you hear the forecast on the radio, you go out with an umbrella. But the forecast is no guarantee of rain, just a warning sign that you should be prepared."