Using ratio’s for relative strength comparison
Posted on June 8, 2014 Leave a Comment
If the Numerator is bigger than the Denominator then the ratio goes UP. If vice versa, the ratio goes down. If we put one security over another then we can plot the relative strength and note when a shift in this relative strength takes place. This shift can show rotation. What you’ll find is the XLP/$SPX ratio EXACTLY nailed all the highs and lows since 2000. Yes, the high in 2000 was accompanied by an inflection in the ratio … what is of interest now is the ratio has not made a new low while the S&P makes new highs. This divergence is important …
XLP/SPX showing a buy after a typical a-b-c correction
here’s a long term monthly of the ratio posted on this blog in/around November. 2014 has shown a divergence that has not occurred since the XLP came on line. The divergence is a “new high” in the S&P while the ratio has NOT made a new low. Monitor …
long term chart showing tops and bottoms since 2000 have corresponded in the XLP/SPX ratio inflection
lastly, I like to use a “real world” or “main street USA” stock to monitor w/ the ratio analysis … WMT/SPX has also been extremely helpful in topping or bottoming at major inflection points. Suprisingly, this ratio has not made new lows either. In the classic technical analysis realm – looks like a double bottom forming.
WMT/SPX ratio
quick review, importance of XLE in the circle of life and sector rotation
Posted on June 7, 2014 Leave a Comment
if you go back some posts you’ll find me recommending to BUY the banks in March 2009. YES .. BUY in MARCH 2009. there was a PATTERN.
additionally, if you go back you’ll find that the XLF had cracked a couple weeks/months before THE top in 2007 but the S&P 500 kept going. It was pretty obvious that ENERGY was running this puppy and even though the XLF had started down, the XLE (crude) had taken off into a parabolic run to 147. And, after that topped the entire thing caved in.
AGAIN – THIS IS NOT PLAYING OUT RIGHT NOW. THE XLF CLOSED ABOVE OUR PATTERN LEVEL FOR THE FIRST TIME SINCE 2014. AGAIN – PATTERNS PATTERNS PATTERNS. The XLF is going up, the S&P 500 is going up AND the XLE is going up. The playbook was PERFECT from a sector rotation last time. Banks cracked (thank you) and then energy/oil ran and then cracked and then we caved, per the sector rotation model. NOTE – the first XLE target is coming into play. THIS IS THE EXACT SAME TYPE of pattern that the DJ Transports crushed. Don’t know if that means it will fail or not – but it’s the same basic pattern of an AB=CD into a 1.618 extension. A “perfect” butterfly SELL pattern on the XLE. So .. again we have a long term PATTERN on the DAX, a pattern on the XLE and a failed pattern on the XLF.
may you live in interesting times …
Continuing to watch the components (>10%) of the S&P 500 – an update
Posted on June 7, 2014 Leave a Comment
CLIFF NOTES: the biggest development of this past week was the CLOSE above our pattern level on the XLF. It is my belief, and history has shown, that the banks LEAD us UP and LEAD us DOWN. As long as the banks are stable, this market will continue it’s “Wizard of Oz’s” climb …also, my last post had the “white flag” at the bottom as I have given up and thrown in the towel to the bear patterns. It’s different this time …
“Great Googalooga, can you hear me talking to you?”
Posted on June 6, 2014 Leave a Comment
Ball of Confusion
In a normal environment this market would be correcting …
another pattern from an all time low .. this one is the German DAX
Posted on June 6, 2014 Leave a Comment
CLIFF NOTES: as I’ve said for the past 6 months (it hasn’t even been a year blogging!) this is a PATTERN RECOGNITION blog. And, guess what … we have ANOTHER PATTERN from an all time low. Here’s the pattern …
German Dax
the EURO now (finally) we are interested ….
Posted on June 5, 2014 Leave a Comment
On 5/21/2014 we posted that we were waiting for 1.3520-1.3580 to provide support for the bounce UP to SHORT. W/ the ECB announcement today it got going BIG TIME and went thru our level by 8 pips. Negligible. Did I deploy capital for V50? ABSOLUTELY NOT … no, I’am building my case for entry on a short and waited, albeit patiently for the level area to get tested and either work or not … it worked so now we build the case for entry and potential entry points. To review the post from 05/21 please see:
https://bartscharts.com/2014/05/21/euro-vs-usd-at-this-point-looking-for-support-to-bounce-up-and-then-try-a-short
NOTE: I truly did not care one bit that the ECB is showing the world how dire their situation is in the Euro Zone today … I trust my patterns and the levels and now build the case for a EURO short and I will deploy capital WHEN/IF a pattern appears. Let’s get to work …
- note blue arrows and .618 overlapping. Polarity on top of a .618 retracement. I like that …watch this level at 1.3805.
- note the blue rectangle shaded area .. price held at that resistance point for 7 days. EXTEND off of that point.
now we are going down to a 30 minute chart …THE KEY TO THIS ENTIRE MOVE IS THE SIGNAL REVERSAL CANDLE …note the blue arrows. I am now PROJECTING UP using this candle and NOTE it stops right at the 4/8 th (.5) increment. This is good because the 8/8 is RIGHT AT THE .618 retracement …
so, the nice thing we are expecting is a 3 wave corrective move UP into our target zone. nothing to do now but wait … you know it will be crazy tomorrow morning so just sit on your hands for non farm payroll. The opportunity to make money will be next week …trust me on that one.
good night!
reheating the Campbell Soup post from Sept 13′
Posted on June 2, 2014 Leave a Comment
CLIFF NOTES: here is the post showing the pattern completing and the short that was recommended. https://bartscharts.com/2013/09/17/soup-is-good-food-campbell-soup-at-key-level-cpb
Here’s the deal … they don’t get any better than this …it was a “near” perfect set up in PRICE AND TIME. An, if you think about it, the entire pattern took from 03/98 to 09/13 to complete. but you know what … it sure is strong. So, the .786 is a little higher around 52 so if we get above that it could really take off.
just thought I would show you a pattern at work …
think about it – go back and look at the post from last September and you’ll see a PATTERN completing and, for whatever reason, price went to that level (note it was actually a high at 49 – 7*7) and the BUYING STOPPED ON A DIME.
Patterns work and sometimes they don’t but they do work 100% of the time .. letting you know when you are WRONG!
Try em’ sometime, you might like it …
Campbell Soup
Hewlett Packard
Posted on June 2, 2014 Leave a Comment
Cliff Notes: w/ a weekly or monthly close below 105 become defensive. It appears clear that a 5 wave sequence is/has unfolded (ing). Other reasons for the resistance are shown below.
HP Monthly
Palladium and AAPL
Posted on June 2, 2014 Leave a Comment
CLIFF NOTES: The second-biggest application of palladium in electronics is in the manufacture of multilayer ceramic capacitors,[42] in which palladium (and palladium-silver alloys) are used as electrodes.[34] Palladium (sometimes alloyed with nickel) is used in connector platings in consumer electronics.[43][44] It is also used in plating of electronic components and in soldering materials. The electronic sector consumed 1.07 million troy ounces (33.2 tonnes) of palladium in 2006, according to a Johnson Matthey report.[45]
CLIFF NOTES 2: for a while it was nearly perfectly synced w/ AAPL until AAPL went parabolic. It has recently broken out of a consolidating triangle while AAPL corrected from it’s near 50 % drop. Once AAPL bottomed, XPD started the leg up. Now we have what is called a butterfly top into the .786 from the old time high.
STRATEGY: watch this level on XPD (880-895) for signs of a top (weekly signal reversal candle) and w/ this confirmation would lighten/close any long AAPL positions. IF we get a WEEKLY close above the 895 level then continue to hold AAPL long.
