MARKET RATIOS
Reading the market in ratios
Cross-market ratios cut through the noise of individual price moves and show what's happening between two assets. When silver is cheap relative to gold, when stocks are expensive relative to gold, when the US is outperforming the rest of the world — these long-running ratios tell you which regime the market is in.
The Joseph Indicator
A McClellan-style breadth oscillator, computed from the daily return differential between the equal-weight S&P (RSP) and the cap-weight S&P (SPY). Positive readings mean breadth is accelerating — the broad market is beating the megacaps. Negative readings mean breadth is deteriorating — the megacaps are carrying the index.
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The Joseph Indicator uses the same shape as the McClellan Oscillator (short-EMA minus long-EMA), but replaces the McClellan’s NYSE advance/decline count with a breadth pulse we can actually compute from public data: the daily return of RSP minus the daily return of SPY. RSP holds all 500 S&P stocks equally, SPY is cap-weighted. When the average stock beats the average dollar, breadth is broadening. When megacaps beat the average stock, breadth is narrowing.
Formula: pulse = 100 × (RSP_return − SPY_return). Joseph = EMA19(pulse) − EMA39(pulse). EMA lengths mirror the classic McClellan (19 and 39 days).
- Above the zero line: breadth accelerating. Broad market outrunning the megacaps — healthy tape.
- Below the zero line: breadth deteriorating. Megacaps carrying the index — narrow rally, stealth weakness.
- Zero-line cross from below: fresh breadth rally — historically a bullish setup after a market bottom.
- Zero-line cross from above: breadth breaking down — watch for broader trouble.
- Above the 90th percentile: unusually strong breadth — often near bear-market recovery lows.
- Below the 10th percentile: unusually narrow tape — often coincides with market tops or panic-narrow moments.
Historical extremes: the biggest positive readings show up right after major bear-market lows (early 2009, mid-2020, late 2022) when the broad market rebounded harder than megacaps. Deep negatives cluster around narrow-rally moments dominated by a small handful of leaders. Use the range picker above to zoom in on any specific regime.
Small Cap Confirmation
Small caps are higher-beta than large caps. When they roll first at a SPY high, that’s a real early warning — a bearish divergence. When they capitulate hard into a SPY low, that’s often a washout worth buying. This card flags each SPY short-term extreme in real time as it develops.
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At every SPY short-term extreme (a local high or low over a ±15 trading-day window), this card checks the trailing 20-day slope of the IWM/SPY ratio. Small caps (IWM = Russell 2000) are higher-beta than large caps, so their leadership behavior tells you whether the broad market is in agreement or not.
- Confirmed high (pink dot): SPY at a short-term high, IWM/SPY ratio rising. Broad participation. Neutral signal — the market may keep going.
- Divergent high (bright red dot): SPY at a short-term high, IWM/SPY ratio falling. Small caps rolling first — classic bearish divergence.
- Confirmed low (bright green dot): SPY at a short-term low, IWM/SPY ratio falling. Small caps capitulating — a washout, historically the setup for the biggest bounces.
- Divergent low (pale green dot): SPY at a short-term low, IWM/SPY ratio rising. Small caps holding — weaker bounce than the washout case.
Historical forward returns (2003–present, over 220 short-term extrema): Divergent highs averaged −4.9% over the next 20 days versus −2.9% for confirmed highs — a real edge at tops. Confirmed lows averaged +5.9% over the next 20 days versus +4.2% for divergent lows — the capitulation setup outperforms. So at tops, look for divergence. At bottoms, look for confirmation.
Stock Market Breadth & Strength
How broad the rally is, and where the leadership is concentrated. Rising ratios here typically mean megacaps, growth, or big-index leadership; falling ratios mean small caps, value, or broad participation catching up.
Risk-On vs Risk-Off Sentiment
Which side of the risk trade the market is favoring right now. Rising = risk assets leading their safer counterparts; falling = money rotating defensive.
Sector Relative Strength
Sector-by-sector performance measured against the broad market or a direct peer. Rising ratios = sector outperforming; falling ratios = sector lagging.
Commodity & Inflation Indicators
Cross-asset ratios that track inflation, real-economy stress, and the balance between commodities and paper assets. Uses futures for gold, silver, oil, and copper — not ETF proxies — for the cleanest long-horizon histories.
Global vs U.S. Market Strength
How U.S. equities are doing against the rest of the world. Rising = U.S. dominant, falling = international / emerging markets taking the lead.
Crypto
Two "digital-asset-treasury company vs the asset they hold" ratios. Rising = the equity wrapper is beating the underlying token — the market is willing to pay a premium for corporate treasury exposure. Falling = premium compressing, or wrapper lagging the asset.
MSTR / IBIT — Strategy vs Bitcoin
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Strategy (MSTR, formerly MicroStrategy) is the largest corporate Bitcoin holder in the world — MSTR shares are essentially a leveraged Bitcoin proxy. IBIT is iShares’ spot Bitcoin ETF, the cleanest liquid tracker of BTC itself. When the ratio rises, MSTR is outrunning the coins it owns — the market is paying a bigger premium for corporate BTC treasury exposure. When it falls, the premium is compressing.
- Rising sharply: speculative premium expanding, retail bidding up the MSTR wrapper.
- Falling: premium compressing — either MSTR sold off, or BTC ran without MSTR keeping pace.
- Flat over months: MSTR trading in line with its underlying BTC treasury.
Context: IBIT only launched 2024-01, so this ratio is short. The most-watched pattern: MSTR premium expanded aggressively in the 2024 spot-ETF-launch cycle, then compressed on subsequent BTC drawdowns. Sustained premium contraction is often taken as a “peak greed” signal by crypto watchers.
BMNR / ETHA — Bitmine vs Ethereum
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Same shape as MSTR/IBIT but on the Ethereum side. BMNR (Bitmine Immersion Technologies) is a public company built around an Ethereum treasury strategy; ETHA is iShares’ spot Ether ETF. When the ratio rises, BMNR is being bid up faster than ETH itself — premium expanding. When it falls, premium is compressing.
- Rising: speculative wrapper premium expanding, ETH-treasury company outperforming ETH.
- Falling: premium compressing — either BMNR lagging or ETH catching up.
Context: BMNR only pivoted to an ETH-treasury strategy in mid-2025, so the history is very short. Treat any extremes with humility — there simply isn’t enough data yet to say what “normal” looks like.
ETHA / IBIT — ETH vs Bitcoin
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The classic ETH/BTC relative-strength ratio, expressed through the spot ETFs (ETHA for Ethereum, IBIT for Bitcoin) instead of the raw tokens. Rising = Ethereum outperforming Bitcoin — the traditional “alt season” setup. Falling = Bitcoin leading — flight to the crypto safe-haven, altcoins bleeding.
- Rising: ETH beating BTC. Historically alt-coin outperformance follows.
- Falling: BTC leading, ETH lagging. Bitcoin dominance rising.
- Sharp reversals: often precede broader crypto regime shifts.
Context: ETHA launched 2024-07, so the joint history with IBIT is short (~1 year). The 2024–2025 cycle saw Bitcoin dominate through the ETF-launch phase, with ETH relative strength lagging and premium compressing.
ETHA / GSOL — ETH vs Solana
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Ethereum vs Solana relative strength, using ETHA (iShares spot Ether ETF) and GSOL (Grayscale Solana Trust). Solana has been the leading “ETH killer” L1 in the 2024–2025 cycle, so this ratio tracks whether the market is favoring the incumbent smart-contract platform or its highest-momentum challenger.
- Rising: ETH beating SOL — large-cap smart contract layer winning.
- Falling: SOL beating ETH — Solana ecosystem momentum accelerating.
Context: GSOL trades at a large discount / premium to its underlying NAV (Grayscale trust structure), so this ratio is noisier than a pure token-price comparison would be. Read the trend more than absolute levels.
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