Below looks at the stock-bond ratio, which is a combination of the S&P 500 and Zero Coupon Bond ETF (NYSE:ZROZ). The chart shows the price action over the past three years. Since the highs back in 2014, the ratio for the most part has created a horizontal channel, chopping back and forth.
The ratio hit the 2014 highs earlier this year at (1), which in time could reflect that a double top took place. Right now, it is way too early to confirm this. Since hitting 2014 highs at (1), the ratio has been a little soft, though nothing too dramatic.
Three weeks ago the ratio tested lower highs again at (2), where it created a small bearish reversal pattern and then started to turn a little lower. This week the ratio created a sizable bearish reversal pattern (bearish wick), showing weakness in stocks and strength in bonds
The ratio is testing 1-year rising support, which so far remains support until support is broken. If support gives way, it could point to further weakness in stocks and relative strength in bonds.