ratio’s are really powerful

been blogging a BUNCH about the importance of the XLP / SPY ratio.  Why?  Well, EVERY turn since 2000 has been nearly exact to the ratio turning up or turning down.  here’s the chart:

XLP / SPY ratio w/ S&P overlaid on top of it ... NOTE divergence since 2012

XLP / SPY ratio w/ S&P overlaid on top of it … NOTE divergence since 2012

folks, it doesn’t get much better than that … the CANDLES is the ratio of XLP / SPY.  The BLUE LINE is the S&P 500.  the chart time frame is monthly.  EVERY PIVOT IN THE STOCK MARKET HAS BEEN A CORRESPONDING PIVOT EQUAL/OPPOSITE in the ratio. (move up in stocks equals move down in ratio and vice versa)

why is this important … well, check out the VIX and the ratio

XLP / SK&P w/ VIX overlaid on top of it

XLP / SK&P w/ VIX overlaid on top of it

here’s the deal — RATIO ANALYSIS is a unique look into the key hole of the INSTITUTIONAL rotation … and, my take is the ratio should have been sreamcing down while the S&P ripped to new highs.  IT DID NOT … that has been something I have tried to resolve for almost two years …

now, why is this low so important in the ratio?  well, take a peak at the RSI BULLISH support zone below:

XLP/SPY ratio found support on bullish RSI zone

XLP/SPY ratio found support on bullish RSI zone

and, then you could have this as your count …

a POTENTIAL count for the XLP / S&P which shows higher

a POTENTIAL count for the XLP / S&P which shows higher

so, let’s review:

  • the CHARTS show
    • when the XLP/S&P 500 ratio pivots so does the market …
    • we had a very noticeable divergence in the ratio and the S&P 500 as the S&P 500 screamed to new highs
    • we have shown that the VIX pivots w/ the ratio
    • we have shown the ratio is at bullish RSI support zone …

all the above tells me 1) volatility is here to stay, 2) expect pressure on the equities and 3) I could and might be completely wrong and that’s OK!

make it a great weekend and rock on, ok?

Bart

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