we had a sell off on the ratio a couple weeks ago BUT there was not follow thru and we still have the lingering level just a little higher which is the real test … again, until we have a strong weekly close above this level I’m in the conservative/flat camp as far at the NASDAQ and Technology goes …
watch this ratio as a key to provide support and resistance for technology names …
yes, technology and specifically the NASDAQ have been ROLLING. that being said, do see some resistance ahead and especially at the level indicated by the XLK / XLP ratio analysis. (technology/ staples) the level shown below has 6 mathematical derived levels all really really close to each other.
“should” provide resistance to this amazing run … that being said, appears like NOTHING can stop this run and this time it’s different and just buy buy buy as it’s all good …
OBTW, glad the REPO and sovereign debt crisis magically just went away …
one last, anyone else find it interesting that, w/ the NASDAQ soaring to new highs the ratio of the XLK/XLP is “barely” at the 50% level. if we had broad participation across the board wouldn’t this (the ratio) be making new highs?
UPDATE: well today was a pretty smashing day as “days” go but in the big picture it’s really nothing. but, he fact that the NYSE Index hit the target – from the all time low – so nicely, we do have to be defensive as explained, roughly a month and a half ago …
updating the NYSE Index for potential targets and you can see 11500-12100 ish as the most likely move … that’s roughly 7-20%. yes, I know that is a big range but all I’m doing, for now, is looking at past corrective measured moves and projecting down. as can see by the below chart, the blue and red arrows have been responsible for pretty much EVERY correction for the past 20 years. so, isn’t it a high probability that this is where the market will go? Seriously, take a few minutes from your ADD Social Media frenzy to study the chart below … folks, it’s EXACT. EVERY CORRECTION HAS BEEN EITHER THE RED AND/OR BLUE ARROWS. also, take a peak at the 2007-2009 thump. that correction was harmonic to the blue and red arrows being 2.236 (square root of 5 and one of our ratios) * blue arrow and 2.618 (Fibonacci) * red arrow. hence, all of the corrections have been harmonic. now that being said, we have finished a LOT of 5 wave sequences sooooo this corrective move might go a little deeper than any of us think BUT a pattern will emerge to give us an opportunity to BUY … so just chill out, turn off the news and, well, hang on.
rounding out everything from the previous post:
if you have been following my blog of late, I’ve slowed down posting because I was ‘waiting’ for some targets to be hit … it looked like a high level broadening triangle was at work – WRONG. 🙂 and w/ the recent breakout to the upside I had to erase pretty much all of the major indices and, well, go LONG TERM and look for ‘other’ patterns / targets to come into play … well, they have and did last week.
here’s a look at the long term targets that have been hit or are less than 1% away from being hit. if these charts were intraday or daily charts then I would ‘wait’ for 1% but when, in the case of the DJIA, we are looking at a projection a mere 124 years in the making then I’ll take a percent here or there …
in no particular order …
Dow Jones Industrial Average: the all time low on the DJIA was in 1896 at 28.48. Using that low as A we move the line sector AB into the high of 2007. Mulitplying that by 1.618 to get the 1.618 price projection we get 29415. Looks like that was hit on Friday. also, note the dashed green lines going from the all time low up into the 2007 high. same measured move into the 29415 high.
if we put a 14 period RSI on the chart .. yup, we would have bearish divergence present.
New York Stock Exchange Index: take time to study the notes on the chart. bottom line – multiple confirmations (different techniques) of strong resistance
NASDAQ: 1.618 price projection target hit and closed right on it Friday. Also, note we have an overlapping 1.618 extension target hit …
one last, our target zone for the XLP/NYA ratio was hit … continued strength will show the defensive move into staples by the big boys. watch this ratio closely ….
the gifts have been unwrapped and food a plenty has been consumed … the rest of the family is watching TV and were about to go walk the beach. rained last night so no surfing .. bacteria blows.
anyway, I’ve received more than a couple emails asking about the different strategies I laid out in my last post around a PATTERN level and how you could work them into your strategies.
in this case, let’s take a look at the chart below – the NASDAQ composite. I remember, quite vividly, blogging about the 6200 level on the NASDAQ. Why? Well, much like our NYSE Index pattern, you can see that the Nazzie had a very nice pattern from the all time low (AB=CD and 1.27 extension) the market didn’t even pause and blew right thru it …but, notice how it came back and touched it and then exploded higher!
that’s our Traders Tip – this level was ‘hidden’ in that it was a pattern that came from the low in 1974 and also the BC extension from 2000-2002. the market WILL come back to these levels and, the highest probability trade is to trade AT THAT LEVEL and go in the direction of the original break of the pattern. in this case, go long at the level.
notice what happens when we use a .618 projection of the AB leg .. in his case .618 AB at 4238. Just like the AB=CD, the market blew thru it and then came back to kiss it and then off it went … there are examples of this everywhere. the longer the time frame to create the pattern-the more important the level.
one last – notice the 1.618 AB = CD at 9315 … per my last post, around 3% higher, you’ll have a KEY level to trade short, tighten stop if long and wait for a monthly signal reversal candle, or do nothing and wait for a signal reversal candle or wait to see if the market blows thru this level and then patiently wait for the market to return to this level to go long …
I respect and honor all religions … so, Happy Festivus and enjoy family friends over the Holidays.
also, look at this clear as day SELL PATTERN on the Nasdaq / XLP ratio. when the blue boxed level gets hit, then SELL the NASDAQ. If, the 1.618 Nasdaq projection AND the Nasdaq/XLP level are being hit at the same time, your probability of an important level to short increases.
Palladium and the NASDAQ have tracked nicely .. watch the upcoming target closely
09/28/2019 – we blogged about this long term target back in March. It was hit on Friday. When we have two 1.618 projections and extensions coming together – it should be a big deal. The other to note is the fact that we have what’s called a “butterfly sell” pattern that hit on the daily and smacked right into the long term targets from 1996. If we get a weekly close below the 1604 ish level, then advise to become defensive. Updated charts below:
would watch the target above, very closely, along w/ the NASDAQ weakness in the coming days/weeks.
05/19/2019 as you can see below, the buy zone was defeated by just a bit but, ultimately, it proved to be good support and the ratio is going UP which shows a risk off mindset w/ regards to the institutions. keep an eye on this ratio as it’s very important and can give us a heads up w/ regard to the overall health of the market.
I put the MONTHLY chart in there to show the much bigger pattern that completed at the lows.
02/28/2019 update: well, the target area shown in the original post was shown and held, somewhat. as the bouncing around started to happen from January 22, 2019 till Feb 21, 2019 it certainly created a nice triangle from the classic EWT. a-b-c-d-e and a resumption of the downtrend. We have rallied a little bit after the breakdown from the triangle (they usually occur in 4th waves – a guideline NOT a rule) so we have either finished or have one more sequence lower to finish – what I believe to be a zig-zag like correction.
if this analysis is correct, then we will bottom NOW or a little lower and the ratio will start to rise.
what does that mean? it USUALLY means stocks will start to sell off.
we are at a key/crucial juncture ..charts below
to show you the ‘power’ of this ratio, I’ve updated a 4 hour intraday chart of the xlp/nazzie ratio (candles) and the nazzie INVERTED (blue line) to show the synchronicity and how well they shake and jive together. note: every inflection point is timed almost exactly. THAT IS WHY THIS RATIO IS SO KEY and HELPS WITH RISK CONTROL
if you have been following me for a while you will know that I really trust PATTERNS and also ratio’s w/ the patterns.
in this case, we have a near PERFECT BUY pattern on our XLP/NASDAQ ratio. Which means, the Staples (a source of risk off for the institutions) ‘should’ start outperforming the NASDAQ from a relative strength basis which ‘should’ cause the NASDAQ to sell off .. IF and ONLY IF the PATTERN works. As you can see below, we have two levels to watch (the one we are at right now) and then one a little bit lower …
my guess (as I NEVER know which pattern will or won’t work) is that the next sell off will occur ‘here’ or the other target a little lower. if we blow thru them w/ power and they fail then it might be game on again .. but let’s not get too hopeful yet. let’s see what our patterns do on the ratio first …
12/16/2018 – take note of the MONTHLY LOG scale on the NASDAQ Composite. I’ve outlined 3 critical areas to monitor on the chart. Also, you’ll see in the second chart that back last March we ID’d the 7600 ish area as the target zone. The market went another, roughly 5% and then ran into another extension ratio. The square root of 3 or 1.732. It did a 173.2 percent extension from 2000-2002. My bust as this fit nicely into an AB=CD projection that was tracking right along w/ the QQQ. And, I know most everyone was unable to hear back in March someone advising caution … no big deal. Anyway, some pretty big support from our LOG trendlines are coming in … it certainly looks ‘heavy’ and as you can see from my previous blog about the XLP/NASDAQ it looks like it has some more room to go … the breaking of these LOG trend lines (on a weekly basis – wait for the end of the week) will signal some heavy selling pressure to come in …
12/16/2018 – as shown before, the ratio of XLP (Staples) / NASDAQ and the PATTERN that completed gave us fair warning of this correction we find ourselves in .. is it the beginning of the ‘next’ bear market. I have no idea. Is it just the ‘buy the dip’ – I have no idea. I guess if you have 50 years you don’t care but if you have 2 weeks you might. It’s all relative folks but we do want to find what the best entry/exit points are as we look to manage risk. that’s all I’m trying to do …
the big institutions have a risk on or a risk off mindset. we hear it all the time. ratio’s allow you to try and get a best guess of where they are … in this case the STAPLES / NASDAQ has helped – a ton.
so, where are we now?
KEY: note the blue arrows. those are the extreme moves up in ‘risk off’ for the institution and then, as shown, the ratio stalls and then the band plays on … believe it or not, we haven’t reached that extreme yet so I simply expect the correction to continue until the ‘target zone 1’ is reached. If your a bull then this seems a logical place to stick your toe int he water else watch and wait for a MONTHLY SIGNAL REVERSAL CANDLE. Else, we could go all the way up to Target Zone 2.
11/20/2018 – so, this ratio is running the show right now. if you read the below NONE of this should be a surprise as the PATTERNS worked and the XLP/QQQ buy pattern has taken off, causing a risk off mindset and the NAZZIE to get blasted. That being said, all is not lost. While I do think we have some more carnage to come, ultimately the ratio is going to smack right into a very strong trend line and the technical analysis concept of POLARITY should cause support or THE bottom for a GREAT BUY. The chart below should give you and idea of why the area labeled ‘resistance’ should offer strong support for the institutions and offer a great BUY of the Q’s and technology.
let me know if you have any questions.
note the ratio .. we have a pretty nice bullish engulfing pattern on the ratio which is precursor to potentially further weakness. If looking to BUY the Q’s would definitely wait for a nice sell pattern or overhead resistance to be hit before stepping in …certainly appears to have some room to run.
here’s the QQQ on a daily time frame w/ the target zone denoted. sure looks like another wave of selling should be starting to complete a 5 waves sequence. Is that A or 1 … if A, then a rally should occur followed by more selling and then a BUY. If 1 then we have, potentially, a lot more downside to come.
I do not know or care which it is ….1 or A. Just looking for a pattern.
Also, doing a monthly log below to look for key trend line support or breaks.
In July, we noticed this pattern completing. Yes, we went 3 points thru but the RATIO held and popped big time today. Watch the median line shown below on the XLP/QQQ and see if price goes thru the line then the sell off could continue.
so, the NASDAQ looks unstoppable … we have sell patterns on the DOW, the S&P, the NYSE Index but the NASDAQ is moving into new territory and it sure looks like finishing/close to finishing a 5 wave sequence. So, why not do the XLP / NASDAQ? Honestly, I don’t know why I haven’t done this one before. I’ve always looked at the NYSE Index or the S&P versus the XLP. One would think that the high flyer would show tendencies to pivot UP or DOWN based on risk on/off mindset by the institutions, right?
so, here’s the XLP / NASDAQ and it paints a nice picture.
- note the AB=Cd pattern that is completing and showing a bullish hammer as of this past Friday’s close.
- RSI – been pegged at the lowest levels since 2000 and has finally showed some bullish divergence.
- we are BELOW the .786 retracement BUT we are not at new all time lows (vice the NASDAQ that is all all time highs)
- there is another level for targets lower (.886 retracement and 1.618 extension) if this level gives away …
- XLP/NASDA w/ the NASDAQ overlaid and INVERTED
- NOTE – EVERY major pivot higher/lower has been at a pivot of this ratio .
Folks … don’t get complacent as there is a very large probability that the next move – across the board – is down.
Just calling it like I see it …
Happy Father’s Day!