my favorite ratio is still warning to stay defensive, for now ….
1/30/2016 – the market has rallied nicely off the most recent lows. HOWEVER, I’m getting into “correction over” or “bull trend resumes” until this target shown below (updated) is hit and then we get a weekly signal reversal candle. Take note – when the overall market is going UP this ratio should be going down. It isn’t … in my world, that means staples are still the play and that’s defensive. Stay tuned …
“defy human nature and do the work …”
folks, the market is giving us a road map and, if we get our “heads out of the airplane” you can see it …
what’s the “best” road map, in my HUMBLED opinion? Ratio analysis using pattern recognition …the key w/ ratio analysis is it gives you the “big boys” road map.
XLP – staples. in times of “risk off” the institutions have to go somewhere, right? they go defensive – staples.
$NYA – a really really important index.
so, when the XLP starts to outperform on a relative basis, then the gig is up and the rotation is occurring.
here’s a more in depth blog about it: http://bartscharts.com/2015/06/27/revisiting-the-xlpspx-ratio-again-in-june-2015/
here’s the ratio, updated:
- note the pattern a little higher (means more losses for stocks, OBTW). That’s a really really powerful SELL pattern which means Equities go up.
- note the pattern timed – almost exactly – EVERY high and low since 2000. I would suspect it would give us clues for longer periods BUT XLP inception was in 1998.
- note, at “market lows” there was a shit load of accumulation occurring or, in the case of the chart “distribution” at the highs.
- one last, as the market continued to breathe into the stratosphere one would think that the RATIO should have been falling out of the sky right? I mean it was so easy, so good BUT the market was telling you – right here on this chart that we were weak internally AND the big boys weren’t really playing were they? If they were full risk on then this ratio would be going down like it did 2002-2007. It didn’t .. in fact NOT ONE SWING LOW HAS BEEN BROKEN since 2007 ratio low. Think about that for a moment …
So, unless your a swing trader w/ a couple days holding period OR a day trader then I wouldn’t touch equities until this pattern completes.
hope this helps.