you realize I watch the XLP/NYA ratio – a lot – and one of the things that I never did till today is look at the “time” component of the first leg down from the XLP inception. today I did and that “time” component aligns nicely w/ a “May” timeframe to really be on the look out for HUGE support in the ratio (which equates to weakness in equities) just a little further below.
if you look at the most recent action certainly looks like we have one more wave lower into the HUGE SUPPORT zone and then, well, it’s judgment day in my humble opinion.
I’ve been monitoring the ratio, daily, for a while as I really wanted the ratio to go down into the “major support” area as I could then feel probability was on my side to take a crack at shorting the market. yes, shorting the market …
if you’ve been reading my blog for a while and for those newer blog readers you will find out/know that the patterns on the XLP/NYA ratio have been exact and helpful in understanding the flow of funds in the big institutions. KEY.
so, I noticed the “key trend line” last time I blogged and noted it but, honestly, haven’t been paying that much attention to it .. just had the lower “major support” level on my hand but, the “key trend line” looks like it has tagged the ratio and provided some much needed support for this falling knife.
now what – well – we are kind of in no mans land … but, I’ll be watching closely and, keep the “major support” level a little below in the back of your head …
note, on the monthly, looks like we will start the month closed below the key trend line from 2007. and he market accelerated upward.
that being said, we are approaching the “target zone” for a lot of math and I also want to call your attention to the monthly RSI and the support zone that its approaching …
I went back and checked .. the last two times it touched this low of a level in the past 15 years was 05/2018 which was part of a -40% ish correction and 07/2007 and we knew what happened during that time frame.
you can go to any financial site and check out “why” the equities sold off today … it could be any number of reasons. at the end of last week, we had a double 3 drives to a top pattern w/ timing that said “monday” is important … to me, it is as simple as that.
in addition to that, take a peak at the XLP/NYA ratio. bounced off some BIG support so the sell off is nothing that wasn’t expected.
how big will this become – if at all? no idea if it’s a one day blip or a big thump coming. just going to look for patterns ..that being said, a ton of euphoria, a lot of SELL PATTERNS and our ratio analysis showing support and Staples to outperform the broader market which usually means – risk off.
ratio slowing it’s advance .. pay attention for “trade” like support …
we have a pretty big ‘wick’ up at the all time high on the ratio and closed w/ a doji today at the level that’s basically equal to the close on Friday. Basically, even though we were down 500+ the ‘fear’ subsided w/regards to the Staples/NYA ratio. this lack of follow thru is telling .. is the low in place, yet. I HAVE NO IDEA but I do trust this ratio .. until we CLOSE ABOVE the blue rectangle area on a WEEKLY basis I’ll move to a neutral stance in the equity market for now … trading bounce (not necessarily a long term investment buy) appears to be working into the vernacular …
my last two posts concerning the NYSE Index and the relative strength of the index (ratio analysis) are here:
just providing an update as it looks like the NYSE Index is about to start a ‘corrective’ leg down … then, ultimately, I will be looking for the BUY PATTERN lower (will try to update if/when it comes) and then an attack on the long term target that I keep showing …
below is the XLP / NYA (relative strength using ratio analysis) – note it is going UP which means staples (on a relative basis) are out performing the overall market = risk off mindset. so stay cautious until we finish this fifth wave up …
the NYSE Index has a TON of stocks in it and is a very good gauge of the overall health of the market. As you can see there is still a much bigger target (almost perfect – an AB-CD and 1.618 extension on top of each other ON A MONTHLY) out there in/around 14217. But note the blue measured moves … they have been very consistent in causing resistance … so, we might be in for another bigger dump if you look at the daily.
strength should get this puppy moving up to the target mentioned above around the 14,200’s so watch this index closely in the coming days and weeks.
have a great LABOR DAY weekend and enjoy your life …
did this for Andy and the gang @seeitmarket: https://www.seeitmarket.com/are-consumer-staples-signaling-a-volatility-omen-17331/
here’s an update as of Friday’s close:
If I learned anything from getting my CMT it was the power of ration analysis. X/Y …. If X is stronger the chart goes up and if Y is stronger then the chart goes down. And, since we are charting securities guess what works on them –the PATTERNS. So the theory goes IF the insititutions are risk off the chart goes down and volatility is suppressed. If the institutions are risk adverse then the chart goes up and volatility picks up and stocks sell off.
MONTHLY of XLP / NYSE Index w/ candles being the ratio and the blue line being the NYSE Index.
Note, at EVERY major inflection of the NYSE Index the RATIO pivoted … it either inflected to go up or down BUT every move of the NYSE Index respected this move.
Monthly XLP / NYSE Index.
Note, most oversold in 6 years and slammed into the .382. Weekly bearish close … did expect it to respect this area and w/ Bradley Date, Martin Armstrong Directional Change and the note from Mike – along, and most importantly, the PATTERNS I did expect this to find support and give at least a daily BUY signal. It has not done that …but all is not lost.
Monthly XLP/ NYSE Index
Note, if we don’t find support here then we have a measured move target a little lower and, ultimately the big green target …
Daily XLP/NYSE Index
Note, the time component (somewhat of a 3 drives to a bottom but still in line w/ ‘time’ of every rally ….
Note, the 1.618 w/ an AB=CD (nice time on AB=CD) right at our .382 from the all time low
Intraday (5 minute) XLP / NYSE
Yes, we closed at the lows … but yes we ‘really didn’t’ break the lows so in order for this market to pivot and correct next week believe this level needs to hold and rally tomorrow morning.
Conclusion: believe this ratio remains important for the overall health of the market and if it can hold these lows then volatility should uptick and the market sells off. IF we breakdown from these levels THEN we’ll seek the next lower target and the market will continue top march up a wall of worry.