when the big boys eat soup volatility rises ….update 2/20/2016
2/20/2016 Campbell’s soup has made new highs, shattering the pattern discussed below. Now, that pattern did hold for 7 months and resulted in a 20% decline. However, when a monthly pattern that’s so nice in PRICE/TIME hits, one would expect a little more of a corrective move. But, we live in a world of probability, so it worked a little then failed. Reminds me of the pattern on GOOGL that held for about the same time and then gapped and ran … why is $CPB so strong? Well, it goes back to the entire concept of RISK ON/RISK OFF and what the “big guys are doing.”
so, an update here for CPB, CPB/NYA, and the comparison of CPB vs VIX.
- CPB: certainly looks like we are in an extended 3rd wave w/ a slight correction to follow and then continued move up into target zone shown. The monthly candle, as of this writing is strong.
- CPB/NYA: note the RISK ON/RISK off nature of this ratio. It’s showing strength – risk off – but has some upper targets ahead. If your looking to be long equities, I would monitor XLP/NYA and CPB/NYA. Any signs of weakness (weekly signal reversal sell candle) would be a good indication to get LONG equities. (the dow seems natural as it DID NOT make a new low)
- CPB vs VIX – folks, right now, they are near mirror images. again, think about it in terms of the institutions.
- when they don’t like the risk .. they roll into conservative plays (CPB perhaps) and that causes volatility to RISE.
- when they feel like taking risk, they cut and run w/ CPB and roll into FB (or something else like SHAK or some other crazy glamour name) and the RATIO underperforms and and goes DOWN which causes volatility to lower …
- so, if you play volatility, look for BUY/SELL signals on the ratio to confirm a potential rise/decrease in volatility.
hope this all make sense … pretty amazing that the CPB/NYA from 10/18 bounced on cue per the chart. I know, I know, it’s a “self fulfilling prophecy” and ‘technicals don’t work’ and ‘patterns are fictitious.’ Ummmm, yup! 🙂
let me know if you have any questions, charts should be self explanatory.
make it a great weekend.
October 18 2015: note, the CPB/NYA ratio has been straight down but it running into potential support a little lower. The thesis is during times of “risk off” institutions roll into the staples and stuff like toilet paper, toothpaste, food, soup, etc. has stronger relative strength. Keep an eye on this next week as support for the ratio “should” work it’s way into more volatility and be bearish for the overall equity picture.
Below the two dashed lines is a post that I did 2 years ago – almost to the day. Pretty amazing …some would call it synchronistic. I’ll just leave it at that …
Personally, I enjoy my Saturday and Sunday morning’s w/ a cup of coffee. Nothing going on, put a little Pandora on the headset and just “chill” and enjoy the amazing fall weather in VA. Little Bird said – “hey Bart, how about CPB soup?” So I took a look and – BAM – I was surprised.
If you go all the way back 2 years ago you’ll see that we had a nice pattern forming and it hit – to a tee at 48.
The market pulled back about 10 bucks and then started to march back up … a slow grind but it did go up.
As you can see above 52 and it was considered a failed pattern.
This week we went up and touched that level and, while I can see a 5 wave count up into this area and seeing an a-b-c type of correction what REALLY made me go hmmm is, of course the relative strength of CPB compared to the NYA. Why? STAPLES BABY …. a couple posts ago I mentioned we should be watching the XLP / $SPX for strength to signal more market weakness. Soup is a staple – period.
So, couple things of note:
- CPB is strong compared to the overall market.
- It has closed, on a weekly basis, the trend channel defined by the blue dashed line.
- there is a 5 wave count into the 52 area so warrant caution here if going to play on the long side.
- the short side is also a play, but would wait for the 48 level to be broken to the downside on a weekly close.
here’s what really has me interested in the RELATIVE STRENGTH OF CPB vs NYA
Points of Interest
- from the 1980’s CPB “outperformed” (the ratio went up) the overall market.
- the ratio TOPPED in 1997. the overall market didn’t top until 2000.
- but when the market did, eventually, top, the relative strength of CPB / NYA bottomed exactly the same time
- think about it for a moment .. the ratio CRASHED going into the top in 2000. Folks, that’s irrational exuberance. throw caution to the wind and get in, get in, get in and then ….ouch.
- while not as dramatic, the same thing occurred in the 2007-2009 period.
- the ratio bottomed as the market topped.
- presently, we do have some strength taking off and we have closed above the black dashed trend line.
- is that a signal that a strong move in the ratio is coming? Potentially, so monitor closely and do not be lulled to sleep. Strength in this ratio is not good for the overall health of the equity market.
one last folks … let’s not try to “fundamentalize” this last chart. that’s for the really smart people .. but take a look at the CPB/NYA ratio and the VIX. It’s a near perfect match.
When the institutions start eating soup … expect volatility to rise.
swings on this puppy have been extremely nice ….charts below.
just follow the bouncing ball …
note, now we have completed the equality of swings and the level held at/around 41.