CHART OF THE DAY: Doug Kass Says This Divergence Is A Big 'Warning Sign'

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Everyone keeps wondering when this Teflon market is finally going to crack.

Here’s one chart, via Doug Kass, that more and more people are paying attention to.

It’s the S&P 500 (red line) vs. the ratio of the Dow Transports vs. the S&P 500 (blue line).

The idea among some “Dow Theorists” is that when the Transports get very weak (relatively) it’s a sign that the market as a whole is doomed to fall.

It is pretty stark the gap that’s opened up this year. At a minimum it at least shows that some parts of the market are getting roughed up by the rise in oil prices.

chart of the day, s&P500 vs. dow transports ratio to S&P 500, feb 22 2012

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