ASX/200 against S&P 500

GRAND CANYON DIVERGENCE!xjo_ax15may08_to_12sep14While the S&P 500 rockets for the stars, fuelled by massive Fed stimulus, the ASX/200 has had the dead weight of the mining sector hanging around its neck. This has caused a record divergence in the two indices, not seen in decades.Aussie banks have done some of the heavy lifting, accompanied by rising titans such as TLS, FOX, WES, WOW, and CSL, but there’s still a gaping chasm to bridge.

Previously, the two tracked a highly correlated path, but since late 2009 the divergence has been unusually wide, as the new cash has chased one of the few raging bulls, the S&P 500.

So what could be an outcome? Most likely, the pre-2009 correlation will reassert itself, which might insulate the ASX/200 from further declines, or provide a tailwind in the case of a further advance.