revisiting the XLP/SPX ratio … AGAIN in June 2015

time for another update … take note, HIGHER LOWS in the ratio and it bounced off the .786 retracement w/ a nice MONTHLY hammer.  It sure appears this ratio is about to go up, which should put pressure on the stock market to move higher.

this has taken a LONG time to itself out ….

potential count for the ratio - note the higher bottoms since 2009.

potential count for the ratio – note the higher bottoms since 2009.

 

inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX

inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX

one last, below, showing the importance of this ratio and the monstrous divergence present.

  • w/ the Equity market soaring to new highs the RATIO should have been falling like a stone.  IT HAS NOT….again, in fact, it has made higher lows. This is a very important sector rotation development that needs to be paid attention to closely.  It WILL resolve itself.
EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio....

EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio….



 

folks, bringing this up, again, because this divergence is MONSTROUS.

in order to show the divergence and how something is “not quite right in toon town” I’ve actually inverted the ratio to show the S&P 500 on top this time.  t

the only reason is it shows the amazing divergence present .. when you look at the chart below notice the perfect synchronicity between the S&P500 and the S&P500/XLP.  but notice around 2011, the dance breaks up … that’s a big deal to me and while it’s true you obviously can’t fight the fed and it’s different this time what I believe it tells us is the “smart money” has stayed in staples or haven’t jumped into this amazing bull market as much as anyone thinks.

notice the divergence!

notice the divergence!

now, here’s the same ratio but this time we have the STAPLES has the numerator … note, when this ratio BOTTOMS the S&P 500 TOPS and when this ratio TOPS the S&P 500 bottoms.  EXACTLY … the theory is the institutions move in/out of “defensive” names during times of volatility so we expect the relative strength of the XLP’s to increase during bear markets / sell-offs (the ratio goes up) and decrease during bull markets/rallies (the ratio goes down)

the ratio HAS NOT GONE DOWN during the past 2 year rally phase … tells me the institutions have kept their powder dry.

XLP / SPX - note divergence and NO NEW LOWS on the ration ....

XLP / SPX – note divergence and NO NEW LOWS on the ration ….

just a matter of TIME …

One Comment on “revisiting the XLP/SPX ratio … AGAIN in June 2015

  1. Pingback: Consumer Staples Strength Says Market Still On Defense | See It Market

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