11/9/2017 – as you can see below and on other post we have been hawking the ratio analysis of XLP / NYSE Index. Won’t go into the why here as that has been done a number of times.
some key points to consider:
we have completed the EXACT measured move correction and biggest since the 2009 lows.
the last time this happened the market corrected 26% – just calling it like I see it.
from a timing we are still not in the ZONE so it could shuck and jive here …
RSI has hit the lower end of the range BUT note it banged around this level for a while as the market (overall market) kept going higher into 2000. so, it doesn’t HAVE TO cause a reaction.
and, one last, today the market lost some ground right as the ratio was completing the measured move that we’ve been talking about for weeks if not months. questions?
two charts – an update to the ratio and the NYSE Index showing how it delayed for a month once the ratio bottomed and then sold off 26%
keep an eye on this ratio!
NYSE Index showing correction once the ratio bottomed
——————————————————————————————————————————————–
10/26/2017 – as you know, we were looking for support to hold on a .382 retracement of the XLP/NYA ratio. this support would cause a bounce or a move higher in the ratio and therefore bring volatility into the market. NOT EVEN CLOSE … that level has been pierced and now lower targets are shown.
folks, if your thinking of shorting I would wait .. when .382’s from all time lows don’t even cause a weekly/monthly move then something bigger is at hand going on …
I did some basic cycle work to show a time zone when the next support could come in December 2017-April 2018.
Until we elect a weekly or monthly signal reversal candle in this key ratio I wouldn’t touch the short side.
10/26/2017 – as you know, we were looking for support to hold on a .382 retracement of the XLP/NYA ratio. this support would cause a bounce or a move higher in the ratio and therefore bring volatility into the market. NOT EVEN CLOSE … that level has been pierced and now lower targets are shown.
folks, if your thinking of shorting I would wait .. when .382’s from all time lows don’t even cause a weekly/monthly move then something bigger is at hand going on …
I did some basic cycle work to show a time zone when the next support could come in December 2017-April 2018.
Until we elect a weekly or monthly signal reversal candle in this key ratio I wouldn’t touch the short side.
2/20/2016 Campbell’s soup has made new highs, shattering the pattern discussed below. Now, that pattern did hold for 7 months and resulted in a 20% decline. However, when a monthly pattern that’s so nice in PRICE/TIME hits, one would expect a little more of a corrective move. But, we live in a world of probability, so it worked a little then failed. Reminds me of the pattern on GOOGL that held for about the same time and then gapped and ran … why is $CPB so strong? Well, it goes back to the entire concept of RISK ON/RISK OFF and what the “big guys are doing.”
so, an update here for CPB, CPB/NYA, and the comparison of CPB vs VIX.
CPB: certainly looks like we are in an extended 3rd wave w/ a slight correction to follow and then continued move up into target zone shown. The monthly candle, as of this writing is strong.
CPB/NYA: note the RISK ON/RISK off nature of this ratio. It’s showing strength – risk off – but has some upper targets ahead. If your looking to be long equities, I would monitor XLP/NYA and CPB/NYA. Any signs of weakness (weekly signal reversal sell candle) would be a good indication to get LONG equities. (the dow seems natural as it DID NOT make a new low)
CPB vs VIX – folks, right now, they are near mirror images. again, think about it in terms of the institutions.
when they don’t like the risk .. they roll into conservative plays (CPB perhaps) and that causes volatility to RISE.
when they feel like taking risk, they cut and run w/ CPB and roll into FB (or something else like SHAK or some other crazy glamour name) and the RATIO underperforms and and goes DOWN which causes volatility to lower …
so, if you play volatility, look for BUY/SELL signals on the ratio to confirm a potential rise/decrease in volatility.
hope this all make sense … pretty amazing that the CPB/NYA from 10/18 bounced on cue per the chart. I know, I know, it’s a “self fulfilling prophecy” and ‘technicals don’t work’ and ‘patterns are fictitious.’ Ummmm, yup! 🙂
let me know if you have any questions, charts should be self explanatory.
make it a great weekend.
Bart
October 18 2015: note, the CPB/NYA ratio has been straight down but it running into potential support a little lower. The thesis is during times of “risk off” institutions roll into the staples and stuff like toilet paper, toothpaste, food, soup, etc. has stronger relative strength. Keep an eye on this next week as support for the ratio “should” work it’s way into more volatility and be bearish for the overall equity picture.
Below the two dashed lines is a post that I did 2 years ago – almost to the day. Pretty amazing …some would call it synchronistic. I’ll just leave it at that …
Personally, I enjoy my Saturday and Sunday morning’s w/ a cup of coffee. Nothing going on, put a little Pandora on the headset and just “chill” and enjoy the amazing fall weather in VA. Little Bird said – “hey Bart, how about CPB soup?” So I took a look and – BAM – I was surprised.
If you go all the way back 2 years ago you’ll see that we had a nice pattern forming and it hit – to a tee at 48.
The market pulled back about 10 bucks and then started to march back up … a slow grind but it did go up.
As you can see above 52 and it was considered a failed pattern.
This week we went up and touched that level and, while I can see a 5 wave count up into this area and seeing an a-b-c type of correction what REALLY made me go hmmm is, of course the relative strength of CPB compared to the NYA. Why? STAPLES BABY …. a couple posts ago I mentioned we should be watching the XLP / $SPX for strength to signal more market weakness. Soup is a staple – period.
So, couple things of note:
CPB is strong compared to the overall market.
It has closed, on a weekly basis, the trend channel defined by the blue dashed line.
there is a 5 wave count into the 52 area so warrant caution here if going to play on the long side.
the short side is also a play, but would wait for the 48 level to be broken to the downside on a weekly close.
here’s what really has me interested in the RELATIVE STRENGTH OF CPB vs NYA
Points of Interest
from the 1980’s CPB “outperformed” (the ratio went up) the overall market.
the ratio TOPPED in 1997. the overall market didn’t top until 2000.
but when the market did, eventually, top, the relative strength of CPB / NYA bottomed exactly the same time
think about it for a moment .. the ratio CRASHED going into the top in 2000. Folks, that’s irrational exuberance. throw caution to the wind and get in, get in, get in and then ….ouch.
while not as dramatic, the same thing occurred in the 2007-2009 period.
the ratio bottomed as the market topped.
presently, we do have some strength taking off and we have closed above the black dashed trend line.
is that a signal that a strong move in the ratio is coming? Potentially, so monitor closely and do not be lulled to sleep. Strength in this ratio is not good for the overall health of the equity market.
one last folks … let’s not try to “fundamentalize” this last chart. that’s for the really smart people .. but take a look at the CPB/NYA ratio and the VIX. It’s a near perfect match.
When the institutions start eating soup … expect volatility to rise.
swings on this puppy have been extremely nice ….charts below.
just follow the bouncing ball …
nice BUY pattern emerged at level forecast …long term pattern came into play. good pattern/good defined risk …
level being hit ….
note, now we have completed the equality of swings and the level held at/around 41.
watch the lower level on CPB … if we break it, selling could really come in ….
1/30/2016 – the market has rallied nicely off the most recent lows. HOWEVER, I’m getting into “correction over” or “bull trend resumes” until this target shown below (updated) is hit and then we get a weekly signal reversal candle. Take note – when the overall market is going UP this ratio should be going down. It isn’t … in my world, that means staples are still the play and that’s defensive. Stay tuned …
“defy human nature and do the work …”
Jim Twentyman
folks, the market is giving us a road map and, if we get our “heads out of the airplane” you can see it …
what’s the “best” road map, in my HUMBLED opinion? Ratio analysis using pattern recognition …the key w/ ratio analysis is it gives you the “big boys” road map.
XLP – staples. in times of “risk off” the institutions have to go somewhere, right? they go defensive – staples.
$NYA – a really really important index.
so, when the XLP starts to outperform on a relative basis, then the gig is up and the rotation is occurring.
here’s a more in depth blog about it: http://bartscharts.com/2015/06/27/revisiting-the-xlpspx-ratio-again-in-june-2015/
here’s the ratio, updated:
couple things:
note the pattern a little higher (means more losses for stocks, OBTW). That’s a really really powerful SELL pattern which means Equities go up.
note the pattern timed – almost exactly – EVERY high and low since 2000. I would suspect it would give us clues for longer periods BUT XLP inception was in 1998.
note, at “market lows” there was a shit load of accumulation occurring or, in the case of the chart “distribution” at the highs.
one last, as the market continued to breathe into the stratosphere one would think that the RATIO should have been falling out of the sky right? I mean it was so easy, so good BUT the market was telling you – right here on this chart that we were weak internally AND the big boys weren’t really playing were they? If they were full risk on then this ratio would be going down like it did 2002-2007. It didn’t .. in fact NOT ONE SWING LOW HAS BEEN BROKEN since 2007 ratio low. Think about that for a moment …
So, unless your a swing trader w/ a couple days holding period OR a day trader then I wouldn’t touch equities until this pattern completes.
folks, the market is giving us a road map and, if we get our “heads out of the airplane” you can see it …
what’s the “best” road map, in my HUMBLED opinion? Ratio analysis using pattern recognition …the key w/ ratio analysis is it gives you the “big boys” road map.
XLP – staples. in times of “risk off” the institutions have to go somewhere, right? they go defensive – staples.
$NYA – a really really important index.
so, when the XLP starts to outperform on a relative basis, then the gig is up and the rotation is occurring.
here’s a more in depth blog about it: http://bartscharts.com/2015/06/27/revisiting-the-xlpspx-ratio-again-in-june-2015/
here’s the ratio, updated:
couple things:
note the pattern a little higher (means more losses for stocks, OBTW). That’s a really really powerful SELL pattern which means Equities go up.
note the pattern timed – almost exactly – EVERY high and low since 2000. I would suspect it would give us clues for longer periods BUT XLP inception was in 1998.
note, at “market lows” there was a shit load of accumulation occurring or, in the case of the chart “distribution” at the highs.
one last, as the market continued to breathe into the stratosphere one would think that the RATIO should have been falling out of the sky right? I mean it was so easy, so good BUT the market was telling you – right here on this chart that we were weak internally AND the big boys weren’t really playing were they? If they were full risk on then this ratio would be going down like it did 2002-2007. It didn’t .. in fact NOT ONE SWING LOW HAS BEEN BROKEN since 2007 ratio low. Think about that for a moment …
So, unless your a swing trader w/ a couple days holding period OR a day trader then I wouldn’t touch equities until this pattern completes.
support here means “institutions” are getting conservative. Hmmmmm, something to watch. Here’s the comparison w/ the $NYA. Note how they are INVERSE. When the blue line ($NYA) is going UP the ratio goes down and when the ratio goes UP the $NYA goes down. We’ve hit big time support on the ratio … again, I expect a pullback/churn from these levels.
October 18 2015: note, the CPB/NYA ratio has been straight down but it running into potential support a little lower. The thesis is during times of “risk off” institutions roll into the staples and stuff like toilet paper, toothpaste, food, soup, etc. has stronger relative strength. Keep an eye on this next week as support for the ratio “should” work it’s way into more volatility and be bearish for the overall equity picture.
Below the two dashed lines is a post that I did 2 years ago – almost to the day. Pretty amazing …some would call it synchronistic. I’ll just leave it at that …
Personally, I enjoy my Saturday and Sunday morning’s w/ a cup of coffee. Nothing going on, put a little Pandora on the headset and just “chill” and enjoy the amazing fall weather in VA. Little Bird said – “hey Bart, how about CPB soup?” So I took a look and – BAM – I was surprised.
If you go all the way back 2 years ago you’ll see that we had a nice pattern forming and it hit – to a tee at 48.
The market pulled back about 10 bucks and then started to march back up … a slow grind but it did go up.
As you can see above 52 and it was considered a failed pattern.
This week we went up and touched that level and, while I can see a 5 wave count up into this area and seeing an a-b-c type of correction what REALLY made me go hmmm is, of course the relative strength of CPB compared to the NYA. Why? STAPLES BABY …. a couple posts ago I mentioned we should be watching the XLP / $SPX for strength to signal more market weakness. Soup is a staple – period.
So, couple things of note:
CPB is strong compared to the overall market.
It has closed, on a weekly basis, the trend channel defined by the blue dashed line.
there is a 5 wave count into the 52 area so warrant caution here if going to play on the long side.
the short side is also a play, but would wait for the 48 level to be broken to the downside on a weekly close.
here’s what really has me interested in the RELATIVE STRENGTH OF CPB vs NYA
Points of Interest
from the 1980’s CPB “outperformed” (the ratio went up) the overall market.
the ratio TOPPED in 1997. the overall market didn’t top until 2000.
but when the market did, eventually, top, the relative strength of CPB / NYA bottomed exactly the same time
think about it for a moment .. the ratio CRASHED going into the top in 2000. Folks, that’s irrational exuberance. throw caution to the wind and get in, get in, get in and then ….ouch.
while not as dramatic, the same thing occurred in the 2007-2009 period.
the ratio bottomed as the market topped.
presently, we do have some strength taking off and we have closed above the black dashed trend line.
is that a signal that a strong move in the ratio is coming? Potentially, so monitor closely and do not be lulled to sleep. Strength in this ratio is not good for the overall health of the equity market.
one last folks … let’s not try to “fundamentalize” this last chart. that’s for the really smart people .. but take a look at the CPB/NYA ratio and the VIX. It’s a near perfect match.
When the institutions start eating soup … expect volatility to rise.
swings on this puppy have been extremely nice ….charts below.
just follow the bouncing ball …
nice BUY pattern emerged at level forecast …long term pattern came into play. good pattern/good defined risk …
level being hit ….
note, now we have completed the equality of swings and the level held at/around 41.
watch the lower level on CPB … if we break it, selling could really come in ….
October 18 2015: note, the CPB/NYA ratio has been straight down but it running into potential support a little lower. The thesis is during times of “risk off” institutions roll into the staples and stuff like toilet paper, toothpaste, food, soup, etc. has stronger relative strength. Keep an eye on this next week as support for the ratio “should” work it’s way into more volatility and be bearish for the overall equity picture.
Below the two dashed lines is a post that I did 2 years ago – almost to the day. Pretty amazing …some would call it synchronistic. I’ll just leave it at that …
Personally, I enjoy my Saturday and Sunday morning’s w/ a cup of coffee. Nothing going on, put a little Pandora on the headset and just “chill” and enjoy the amazing fall weather in VA. Little Bird said – “hey Bart, how about CPB soup?” So I took a look and – BAM – I was surprised.
If you go all the way back 2 years ago you’ll see that we had a nice pattern forming and it hit – to a tee at 48.
The market pulled back about 10 bucks and then started to march back up … a slow grind but it did go up.
As you can see above 52 and it was considered a failed pattern.
This week we went up and touched that level and, while I can see a 5 wave count up into this area and seeing an a-b-c type of correction what REALLY made me go hmmm is, of course the relative strength of CPB compared to the NYA. Why? STAPLES BABY …. a couple posts ago I mentioned we should be watching the XLP / $SPX for strength to signal more market weakness. Soup is a staple – period.
So, couple things of note:
CPB is strong compared to the overall market.
It has closed, on a weekly basis, the trend channel defined by the blue dashed line.
there is a 5 wave count into the 52 area so warrant caution here if going to play on the long side.
the short side is also a play, but would wait for the 48 level to be broken to the downside on a weekly close.
here’s what really has me interested in the RELATIVE STRENGTH OF CPB vs NYA
Points of Interest
from the 1980’s CPB “outperformed” (the ratio went up) the overall market.
the ratio TOPPED in 1997. the overall market didn’t top until 2000.
but when the market did, eventually, top, the relative strength of CPB / NYA bottomed exactly the same time
think about it for a moment .. the ratio CRASHED going into the top in 2000. Folks, that’s irrational exuberance. throw caution to the wind and get in, get in, get in and then ….ouch.
while not as dramatic, the same thing occurred in the 2007-2009 period.
the ratio bottomed as the market topped.
presently, we do have some strength taking off and we have closed above the black dashed trend line.
is that a signal that a strong move in the ratio is coming? Potentially, so monitor closely and do not be lulled to sleep. Strength in this ratio is not good for the overall health of the equity market.
one last folks … let’s not try to “fundamentalize” this last chart. that’s for the really smart people .. but take a look at the CPB/NYA ratio and the VIX. It’s a near perfect match.
When the institutions start eating soup … expect volatility to rise.
swings on this puppy have been extremely nice ….charts below.
just follow the bouncing ball …
nice BUY pattern emerged at level forecast …long term pattern came into play. good pattern/good defined risk …
level being hit ….
note, now we have completed the equality of swings and the level held at/around 41.
watch the lower level on CPB … if we break it, selling could really come in ….
Below the two dashed lines is a post that I did 2 years ago – almost to the day. Pretty amazing …some would call it synchronistic. I’ll just leave it at that …
Personally, I enjoy my Saturday and Sunday morning’s w/ a cup of coffee. Nothing going on, put a little Pandora on the headset and just “chill” and enjoy the amazing fall weather in VA. Little Bird said – “hey Bart, how about CPB soup?” So I took a look and – BAM – I was surprised.
If you go all the way back 2 years ago you’ll see that we had a nice pattern forming and it hit – to a tee at 48.
The market pulled back about 10 bucks and then started to march back up … a slow grind but it did go up.
As you can see above 52 and it was considered a failed pattern.
This week we went up and touched that level and, while I can see a 5 wave count up into this area and seeing an a-b-c type of correction what REALLY made me go hmmm is, of course the relative strength of CPB compared to the NYA. Why? STAPLES BABY …. a couple posts ago I mentioned we should be watching the XLP / $SPX for strength to signal more market weakness. Soup is a staple – period.
So, couple things of note:
CPB is strong compared to the overall market.
It has closed, on a weekly basis, the trend channel defined by the blue dashed line.
there is a 5 wave count into the 52 area so warrant caution here if going to play on the long side.
the short side is also a play, but would wait for the 48 level to be broken to the downside on a weekly close.
here’s what really has me interested in the RELATIVE STRENGTH OF CPB vs NYA
Points of Interest
from the 1980’s CPB “outperformed” (the ratio went up) the overall market.
the ratio TOPPED in 1997. the overall market didn’t top until 2000.
but when the market did, eventually, top, the relative strength of CPB / NYA bottomed exactly the same time
think about it for a moment .. the ratio CRASHED going into the top in 2000. Folks, that’s irrational exuberance. throw caution to the wind and get in, get in, get in and then ….ouch.
while not as dramatic, the same thing occurred in the 2007-2009 period.
the ratio bottomed as the market topped.
presently, we do have some strength taking off and we have closed above the black dashed trend line.
is that a signal that a strong move in the ratio is coming? Potentially, so monitor closely and do not be lulled to sleep. Strength in this ratio is not good for the overall health of the equity market.
one last folks … let’s not try to “fundamentalize” this last chart. that’s for the really smart people .. but take a look at the CPB/NYA ratio and the VIX. It’s a near perfect match.
When the institutions start eating soup … expect volatility to rise.
swings on this puppy have been extremely nice ….charts below.
just follow the bouncing ball …
nice BUY pattern emerged at level forecast …long term pattern came into play. good pattern/good defined risk …
level being hit ….
note, now we have completed the equality of swings and the level held at/around 41.
watch the lower level on CPB … if we break it, selling could really come in ….
CLIFF NOTES: the XLP/$NYA ratio, when it inflects UP or DOWN, has been responsible for every major pivot in the US Equity Structure over the past 14 years. It is sitting on a cliff of support, which if lost, will signify a move OUT OF “risk adverse” asset class of staples and I would expect the entire equity complex to explode in a phase transition of parabolic proportions. Stay tuned … if it holds, then perhaps the SELL pattern on the $NYA will hold and a “normal” and “needed” correction will ensue. Trying to be to the point and point readers in a less looked at aspect of institutional rotation and flow of funds.
Let’s start at the beginning w/ definitions –
New York Stock Exchange Index ($NYA):
An index that measures the performance of all stocks listed on the New York Stock Exchange. The NYSE Composite Index includes more than 1,900 stocks, of which over 1,500 are U.S. companies. Its breadth therefore makes it a much better indicator of market performance than narrow indexes that have far fewer components. The weights of the index constituents are calculated on the basis of their free-float market capitalization. The index itself is calculated on the basis of price return and total return, which includes dividends.
The two biggest benefits to investors of the NYSE Composite Index are (a) its quality, since all its constituents have to meet the stringent listing requirements of the exchange, and (b) its global diversification, with non-US companies accounting for more than one-third of market capitalization. NYSE-listed foreign companies have their headquarters in 38 different countries, with the most foreign issuers from Canada, China, the U.K., Japan and Mexico.
Consumer Staples (XLP)
Essential products such as food, beverages, tobacco and household items. Consumer staples are goods that people are unable or unwilling to cut out of their budgets regardless of their financial situation. Consumer staples stocks are considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing.
Consumer staples can be a good option for investors seeking slow and steady growth.
Ratio Analysis using Technical Patterns:
Numerator / Denominator
If we want to see if a certain (security vs sector) or (security vs security) or (sector vs sector) or (whatever) we put one on top of the other. IF the ratio goes UP then the top “thing” is stronger. If the ratio goes DOWN the bottom “thing” is stronger
XLP/$NYA :
w/ the definition of staples above, one would think that “institutional money” would rotate into defensive names during times of volatility, corrections or bear markets.
if we plot the ratio above THEN when XLP/$NYA goes DOWN we can think the party continues … when it completes a bottoming pattern and goes back up then a defensive rotation should occur signifying relative strength increasing and a move into the staples.
So, w/ the definitions complete, let’s see where we are:
In the charts below you can see that, back in June we saw a pattern completing in/around the 10900-11080 level. It did in fact hit and the market sold off. The broader indices are making new highs and the bullish aspects of this current picture are unquestionable strong. On an intraday basis, we are approaching a key level at 10988. If we are going lower then I would expect it too hold as resistance.
NYSE Index 4 hour chart
here are the charts from June 2014.
doing some geometry work, but basically showing resistance as noted in the above chart.
now, what about the ratio? Is that telling us anything of importance? Well, yes.
Ratio Analysis w/ $NYA overlaid on top of the ratio
Bunch of stuff going on here:
the blue line is the $NYA
the candles is the ratio of XLP/$NYA
note the blue rectangles – at every MAJOR pivot the ratio is almost a mirror image of the $NYA.
the big “clue here” is that the ratio has held the 50% retracement level since 10/2011. folks, that’s almost 3 years. stop and think for a moment about that one … notice in the past we had straight UP moves and DOWN moves which corresponded very nicely to the $NYA equally and opposite. HOWEVER, now for almost 3 years the XLP has, on a relative strength basis, held it’s own, so to speak.
this divergence is something to watch and be very aware. YES, I know that we are continuing higher and higher. I also know that it’s been confirmed that the Central Banks around the world have injected 29 trillion (yes 29 trillion) into the US equity structure…it’s the greatest ponzi scheme of our time.
what’s the bullish picture … ? Well if we lose that level to the downside that has held for 3 years THEN this market will EXPLODE higher and vacuum into the stratosphere. not that I don’t want that ….but I do want a NORMAL market. Folks a .382 correction is very bullish and natural …what’s so wrong w/ that?
If you do ratio analysis, you absolutely need to keep this level and pattern on your radar screen ….
