Ratio Analysis Time – June 28, 2023

Was over on the Top Gun options group chat working some NVDA charting and I decided to pull out some ratio analysis on the XLP and NVDA.

XLP/NVDA

Some stuff we need to consider:

  • Note the red trend line connecting the lows .. it’s a perfect fit. Certainly suggests the “ratio” is about to rise which means, in the past, some heavy weight for the NASDAQ and I imagine the overall market. Hmmmm …
  • Overlaid on top of the ratio (blue line) is the NASDAQ composite … take a peak at how it reacted when the ratio rose … except for one time during the 2010-2012 timeframe, it rose and so did the market. That’s pretty much it … of late, it’s “timed” the NASDAQ pretty well.

When we add up the 20 year trend line support that sure looks like it wants to hold and the ratio starts rising – the NASDAQ hasn’t necessarily been bullish during these times now, has it?

Ratio showing us something …or not?

well, we have a DAILY breakout above the channel that has been defining the ratio for pretty much all of 2021. is this a valid breakout or a gotcha? I’ll make an educated guess once we close this week out … looking for a WEEKLY close above the top of the channel w/ strength.

will be interesting to see what happens w/ the Palladium level ID’d on the post before this one … we are getting to a point where one of the PATTERNS will fail and that will give us a good idea of where we are …

fun times, hugh?

the ratio … what’s it saying

…. ratio has exploded but appears we are running into stiff resistance

if you want to take a peak at what we’ve been doing w/ the XLP / NYSE Index (Staples/overall market) then search for XLP on the site at the top right of the home page …we very clearly saw the ratio bottom and start back up (which means, on a relative strength basis that staples were starting to outperform (negative for equities)) back in late December and January. what is fascinating to me is the STRENGTH and VOLUME of the candles of late. frankly,they are blowing away the candles from the 2007-2009. it sure looks like, from the ‘big boy lens’ (hedge funds, relative value funds, institutions, etc.) that they are moving into the safer names (staples) in a BIG WAY. I trust this ratio because, as you can see, it’s been responsible for guiding the MAJOR tops and bottoms since the XLP ETF was created back in 2000.

per the chart below, we are in uncharted waters … however, note the blue rectangle areas. if we take these areas and then look at the NYSE Index that I just blogged about earlier THEN we could very well see a sustainable bounce (note I did not say end of the dumping) but a bounce … so, pay attention to the level on the NYSE Index and also the blue rectangles below …

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