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 …
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 …
here’s last weeks post on the Asian Open and the YEN. level worked pretty well and we rallied pretty much all week. the USD vs YEN should stay below the 108.46 level and/or 109.866. if (the big if) this sell signal works then it ‘should’ put pressure on the equities:
even w/ the FED cutting rates take note of the key (intraday sell signal) on the bonds … intraday/15 minute chart. we have higher targets but this is the ‘first’ sell signal from the lows back on 3/13.
here’s the potential mirror image foldback I’m monitoring on the NYSE Index. Pretty symmetrical pattern. note the key trend line … that’s a BIG DEAL.
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 ….
06/09/2019 – back to our old favorite. you know I’ve been watching this one for a while. I was hawking a low in the ratio in mid-2018 but missed it from a time perspective … then, in retrospect, easily saw the measured move and the .786 retrace. I’m human, I missed it. should have been more diligent – especially w/ the time cycles coming in from the 2007 low. the TIME had worked as support before so why not now …? Oh well.
now, we can pretty nicely see 5 waves up and we are in the 5th wave up .. could be a 1 or an A. only TIME will tell. I feel reasonably certain that after a pullback on the ratio (less volatility, higher stocks) there will be another 5 wave move higher if this analysis is correct.
I’ve also included an overlay of the NYSE Index and the XLP/NYA ratio to show the thesis that – by using patterns to ratio analysis we can find potential inflection points. in this case – staples (XLP) represent a risk off mindset (volatility/selling) when they outperform the overall market (the ratio goes up). when the overall market (NYSE Index) outperforms (the ratio goes down) then risk is on and the market volatility should go down and prices go up. Seems to work …
so, 5 waves up from the bottom, 3 wave pullback and 5 waves up … that’s what were looking for, right now. TIME will tell.