Bearish Engulfing Candle on the Market Top Chart

This is one chart of a market top that I track. It is a price ratio of the DJIA and the 30-year Treasury bond price. A rising ratio indicates stocks outperforming bonds. It is now sporting a big bearish engulfing candle. The best case scenario is the 1998 correction. I've discussed the similarities with the late 1990s before. While I wouldn't draw too tight a correlation, it can't be ruled out yet. Looking at EMs, it's more likely this is 1997 than 1998, that is, even if a higher high is coming in stocks, there's probably a lot of pain between now and then for global markets. Even if the bull isn't dead, bears with a global and multi-asset class focus probably have years of opportunities ahead.

I don't take this chart as gospel, but use it in conjunction with others. I've seen different versions (such as SPY/10-year yield) and it also shows a topping formation. I look for confirmation from many different sources and only consider this one piece of evidence.

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