09/17/2016 – as you can see below, this SELL the ratio (BUY THE NYA Index) worked very nicely. Again, for those of you new to my blog the concept is this:
- Me or You individually don’t do a darn thing to move the market. It’s the INSTITUTIONS that make the market. When they get ‘risk adverse’ they move into ‘stuff’ we need to live .. aka Staples (XLP)
- Using ratio analysis – in this case XLP (ETF) / NYSE Index (the largest index out there) we can see what ‘they’ (the collective they) are thinking …
- IF the ratio is going UP then XLP (Staples) are stronger than the overall market … read: the institutions are moving into ‘conservative names’ and are “risk adverse.’
- IF the ratio is going DOWN then XLP (Staples) are weaker than the overall market…read: the institutions are moving out of ‘conservative names’ and are ‘risk on.’
- Using PATTERNS we can ‘see’ potential inflection points for the ratio and make investments accordingly.
In the charts below we can see:
- POLARITY – during the 2007-2009 drop, you can see that the ratio EXPLODED higher and promptly ran into major resistance. This level held for years but was finally broken thru in/around 2015-2016.
- The polarity principle is former R becomes Support (and vice versa) so the red arrows turn into green arrows (representing Support)
- Based on the current length and (my opinion) an overextended market the probability of this ratio stopping at the blue highlighted region is more (again my opinion) than the ratio slicing thru this area.
- IF it does THEN the lower level (highlighted orange) is the next logical stop.
- ‘Basic’ Trend line channel … note we are approaching the lower portion of it
- Multiple retracement levels – the .382 from the all time low of 2008 is key
- An RSI finding monthly support which began every move UP in the ratio.
- note the second chart below and what this did to the NYSE Index.
- We have measured moves (solid and dashed blue arrows) showing the ‘largest’ corrective move in the ratio since inception
- Note: the dashed blue line is using the “close” and not the wicks that tried to get thru this key level on the ratio
One last chart … note, IF the ratio is BULLISH then we have (again all probability) been carving out an Elliott Wave A-B-C correction labeled below.
- w/ this type of correction the ‘C’ wave is sometimes 1.618*’A’ which you can see nicely hits where 1=5 of the C wave. So, shown below in the light blue shaded area are potential zones for the reversal.
So, monitor this ratio for a weekly signal reversal candle (bullish) and this should market a correction .. .I’m not calling for a crash or a bear market or any of that … it’s about ‘time’ for a nice thump. How deep it goes…? No idea but I’ll certainly be watching this ratio to give me a heads up on where to buy.
Here’s the DAILY ratio w/ NYSE Index overlaid on top of the ratio … note the ‘SELL RATIO’ and ‘BUY EQUITIES’ …this ratio works.
Here’ the MONTHLY NYSE Index:
I did a .786 AB-CD projection from the all time low in 1974 and that hit the 1.27 extension (monthly) – where we are right now. Also, take note of the blue arrows … doing a count where 1=5 we get to 12,500 ish. So, again, would expect some sort of resistance to be forming – albeit soon.
one last … folks 2 weeks till quarter end. I hate to add opinion here but do you really think THEY (the big guys/gals) are really going to sell this market as we approach an AWESOME quarter end? Ummmmm, not I. So, the real shenanigans should start the first week of October, if at all …
hope you have had and are having a good weekend.
Bart
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here’s the power of this ratio:
- https://bartscharts.com/2016/05/08/xlp-nya-update/
- ratio BOTTOMS, at the BUY pattern of the ratio – SELL equities
- https://bartscharts.com/2016/03/30/xlp-nya-update-pay-attention/
- when the ratio TOPS then BUY equities
- we have a wonderful SELL the ratio pattern which means Equities should be bottoming for a BUY swing trade of the US equity structure.
DANGER WILL ROBINSON … if/when the patterns fail (and they do) the market breathes in the direction of the failure. Note, we have some VERY strong thrust into the pattern level and this “usually” means the pattern will fail BUT you never know do you? So now for the best part of the pattern recognition world the “if-then”.
IF the pattern works, equities should bottom for a nice BUY (swing trade – not long term for now … )
IF the pattern fails, equities will continuing selling off and we should look for the NEXT pattern to play … make sense?
Here’s the “perfect” sell pattern:
