XLP / S&P 500 – support here is justified and, perhaps, a signal of volatility to come?

there is a different look/feel to the XLP / SPX versus the XLP / NYA. If you look at the chart below, you’ll see we did a pretty tight consolidation from 2011-2016 in the XLP / SPX.  It’s a ‘perfect’ sell pattern at “C” that complete and then the ratio fell out of the sky.

i’m curious at the lack of follow thru w/ regards to the S&P 500 (not making new highs like Russell, NASDAQ, etc) so I decided to take a look at this ratio instead of NYSE as the denominator.

as you can see we have some key observations:

  • take the time to study ‘past’ retracements as ‘sometimes’ the same ratio/vibration (remember that’s all it is – vibration) is present. In this case we have the .707 retracement level present at the high and now here at the lows
    • 2
    • Square Root of 2= 1.4142
    • 1/1.4142 = .707
  • the harmonic 1.27 is present in that 1.27*AB = CD
    • 1.618
    • square root = 1.27
  • note the blue measured move arrow from the XLP inception in 1998 is present in this correction
  • the MONTHLY RSI is at the lowest level since the inception of the XLP and this ratio of XLP/SPX
  • THE TIME OF THE CORRECTIVE MOVES OF THE RATIO ARE EQUAL

what am i trying to get at? nothing more than I’m very cautious of any further up move in the markets (for now) .. .historically, when the XLP starts to perform it signals a ‘risk off mindset’ of the big institutions and volatility starts to rise …

while I DO NOT think the bull market is over by any stretch, I do think that another move lower is in tune (note the music reference :)) w/ the form, balance and proportion we are used to seeing from a corrective nature.

Bart

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