Tuesday we posted a mystery chart and asked you all to let us know what you would do – buy, sell or do nothing?

As we expected, there weren't any bearish responses. Instead, most of you were buyers at current levels or on a pullback. We believe that the evidence is clearly pointing in that direction too, which is why we put the question out there in the first place. What, if anything, could we be missing?

Now that we're all on the same side of the boat, let's get into the chart and why we feel it's relevant. The chart we originally shared was an inverted daily line chart of the iShares MSCI Japan ETF (EWJ) relative to the SPDR S&P 500 ETF (SPY).

The corrected chart shows prices resolving a multi-year range to the downside in mid-2018, quickly meeting our first downside objective and then consolidating in a classical "bear flag" pattern. Its downward-sloping 200-day has finally caught down, and prices are now resuming lower, with momentum quickly getting oversold again.

Chart showing the performance of the iShares MSCI Japan ETF (EWJ)
All Star Charts/Optuma

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This looks like a very clear chart, with all of the evidence suggesting that lower prices are ahead. From a risk management perspective, we can use our initial target of the 161.8% extension as our new risk management level, targeting the 261.8% extension over the intermediate to long term.

Japan isn't the only developed market that's at or near new lows relative to the S&P 500. While some outliers have been able to buck that trend, when looking at the group as a whole, we see that these multi-year trends of underperformance are very strong, and there continues to be little evidence of them reversing any time soon.

Calling tops and bottoms is not our thing, so instead, we'll use these new breakdowns to define our risk on the short side if executing these pair trades, or we'll continue to use it as information to identify fund flows. Money flows to where it's treated best ... and most developed markets excluding the U.S. and Canada have not been kind to it for a very long time.

We've done a deep dive into this area for Premium Members of All Star Charts, outlining some of the best pair trade opportunities available right now. For access to the full deep dive and all of our premium research, start your 30-day risk-free trial or sign up for our "Free Chart of the Week" to receive more free content like this.

Thanks for reading, and let us know if you have any questions!