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.
there is an old adage – the banks lead you up and lead you down. the market has blasted to old all time highs or thru them and the banks…? well, they rallied a little but have not shown the strength of the overall market, especially technology.
let’s keep a close eye on them over the coming days and weeks … important.
here’s the support charts that I posted back in the past to show the patterns at work – it has NOTHING to do w/ me. I just pull out the crayons and try to find the patterns. keep it simple.
this chart was finding support at the “first” level after a pretty liquidating sell off from 112. pay attention … a LOT of math and patterns coming together. One of the key aspects of the chart below (if you have read this far) is watching for former FAILED PATTERNS.
as you can see, that level worked and the banks rallied … I apologize for not having the SELL pattern but I never posted it. Do you see it? After not making it above the 117 level it sold off big time … and, using some math and patterns we found a support zone ….
in the chart below I show you the SELL PATTERN on the banks. YES, this is after the fact and I DID NOT post this at the time but wanted to show 1/the harmony of this index and 2/ the pattern for illustrative purposes. the other reason for posting this is to demonstrate the bank rally off the March 2020 lows has been feeble …
and as we can see, the banking index / NYSE Index is tepid, at best. really don’t think the banks are too healthy right now …
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.