this is ‘kind of important’ … I think… and you might want to read to the bottom

everyone is talking about low volatility .. trust me, I hear ya.

but man, do I love me some ratio’s …here’s the deal, put one security over another and guess what. If it’s going HIGHER then the numerator is stronger and if it’s going LOWER the denominator is stronger. BOOM …

so, a couple weeks ago I blogged about my ‘favorite’ ratio finding support .. the XLP/NYA.  It’s a very simple observation … XLP is staples and it’s defensive. the ‘big boys’ shift their focus on staples in time of RISK OFF. yes, i said it .. i know the market will NEVER go down and its always straight up but … well, just take a look

1.  BLUE LINE is XIV which is an INVERSE of the VIX.  Basically when this puppy goes up volatility goes DOWN and when it goes down volatility goes UP.  NOTE – it’s a rocket ship right now, corresponding to very very low volatility.  that’s the blue line
2. the candles are my favorite ratio .. the XLP / $NYA.  when the ratio goes UP the XLP is stronger and the thesis is this is defensive rotation by the big boys – aka Goldman Sachs (LOL) and the institutions.
3. note, I put them on top of each other to show a pretty important correlation
   1. note the blue rectangles.
      1. those represent inflection points in the XIV and the ratio
      2. NOTE: when the XLP / $NYA bottoms, the XIV goes down (volatility increases) and when the XLP/$NYA tops, volatility – as measured by the XIV – goes down the tubes.

So, it’s official:

• the market is NEVER going down as measured by money managers sentiment index the BULLISH SENTIMENT IS AT A 30 YEAR extreme.
• the XIV is basically parabolic w/ the ratio having bottomed …

a simple observation can be made – the XIV is about to decline which should to lead to a volatility increase.  now to soon ….

also … well, the Nixon Inauguration of 1/20/1973 was about 2300 weeks ago .. current S&P price, take a peak.  the market topped in/around that inauguration.

here’s what the XIV and the S&P look like together …

the kind of look the same, don’t they ….?

just typing an observation – the market will  never go down.

make it real – B

Author: BART

BART is a CMT and an expert a "advanced" pattern recognition used w/in the intermarket analysis discipline. He's also an accomplished Business Development Executive providing solutions to a myriad of business markets. View all posts by BART