can’t believe it’s been since mid-april since I posted about the market. at the time, I spied a triangle forming which proved to be wrong and it broke down and the market has continued it’s advance. humbling for sure .. when I was working up the triangle thesis I came up w/ the level that’s shown below but, honestly, I shrugged it off. “it’s not going to go all the way down there, I thought .. ” but I do remember saying, “if it could get down there, then what a perfect spot to short the market.”
folks, we are there … don’t hold me to it BUT I have around 12 reasons that this is HUGE support for the XLP/NYA ratio. don’t need to go back over the importance of this ratio … for a summary when ratio goes up risk is off and when ratio goes down risk is on. UP = bad equities. DOWN = good equities. so support should mean bad equities.
put/call ratio at an extreme, sentiment at an extreme and MONSTER support on the XLP/NYA ratio. probability says support holds and equities top and start back down … all for now. let me know if you have any questions.
disclaimer: this is ALL probability but we now have a very well defined street sign. the market COULD blow right thru the level below and it’s a rocket ship takeoff higher … that is also a probability.
so, play it safe … if it bounces strongly in / around this area then short BUT if it closes on, say a weekly basis, below the defined target area w/ conviction then be long. but for NOW, would wait and see which way she goes. hope this helps.
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 …
there are also two other posts which mention the target in Dec and then early January. resistance? yes! contagion selling? no! so, here we go …
if we take a look at the 2007-2009 correction we can find harmonics to it and go into the past (I’ve done it) and then PROJECT those harmonics on future support …that’s all the chart below is … we have some “standard” fibo’s coming in but we do have 2 ratios (that’s always good) and for me the most important point is they all land right on the key retracement points … so, very quickly, let’s watch that 10250-10400 for some nice support!
if we swing down to a daily it “appears” (see above title for hope) that we are in a 5th wave down so we ‘should’ (operative word) see a bounce here-soon. also, I haven’t updated it but am watching it like a hawk – the USD vs JPY has NOT seen new lows and if that maintains support this selling will abate.