Again the disclaimer: It’s one indicator, and it’s probably an indicator I look at a little too closely. But then again I get nerded out on this stuff.
The TSX Venture to TSX ratio is making a hard push at the important resistance zone after choosing up rather than down out of the consolidation. Recall we originally noted its status in the Diamond consolidation pattern on June 17 from which a break one way or the other was imminent.
The implication of a continued strong ratio would be a positive signal for inflation (TSX-V/TSX is well correlated over time to both the CRB index and US inflation expectations).
The ratio can still be considered at the critical resistance zone by the weekly chart, but the daily chart above sure does put us on alert for a breakthrough or a failure in the near-term.
For perspective, the very long-term chart shows how significant a breakout would be and how disastrous (for the inflationary speculation trades) a failure would be.