XLP/NYSE Index ratio – BUY

this ratio xlp/nya is a GREAT guidepost .. buy pattern complete. if it holds and starts back up expect selling to being again .. KEY LEVEL

for those who follow this blog – remember – it’s all about PATTERNS and I try (operative word) to remove any subjective analysis from the mix. PATTERNS work and sometimes they don’t …

additionally, you’ll see here – https://bartscharts.com/2020/03/23/xlp-nya-ratio/ that the XLP/NYSE Index ratio has been a good guidepost for BIG inflections UP and DOWN for the equity market.

today, at the low on the ratio, we completed a BUY PATTERN. we do have a little lower for other targets to get hit but, essentially, we have a BUY PATTERN complete and, if it works (operative saying), THEN the selling should resume …

if it fails, which it certainly could, then this is a very bullish development and the rally will continue .. patterns like this, when they fail, are usually face rippers so time to hold on and see which way the market Gods would like to go …

XLP/NYA ratio …

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 …

the ratio … what’s it saying

…. ratio has exploded but appears we are running into stiff resistance

if you want to take a peak at what we’ve been doing w/ the XLP / NYSE Index (Staples/overall market) then search for XLP on the site at the top right of the home page …we very clearly saw the ratio bottom and start back up (which means, on a relative strength basis that staples were starting to outperform (negative for equities)) back in late December and January. what is fascinating to me is the STRENGTH and VOLUME of the candles of late. frankly,they are blowing away the candles from the 2007-2009. it sure looks like, from the ‘big boy lens’ (hedge funds, relative value funds, institutions, etc.) that they are moving into the safer names (staples) in a BIG WAY. I trust this ratio because, as you can see, it’s been responsible for guiding the MAJOR tops and bottoms since the XLP ETF was created back in 2000.

per the chart below, we are in uncharted waters … however, note the blue rectangle areas. if we take these areas and then look at the NYSE Index that I just blogged about earlier THEN we could very well see a sustainable bounce (note I did not say end of the dumping) but a bounce … so, pay attention to the level on the NYSE Index and also the blue rectangles below …

Intraday BUY ratio = sell equities

…using ratio analysis we can support risk on/ risk off strategies. in this case we use the Staples ETF (XLP) versus the NYSE Index

here’s an intraday look at the XLP/NYSE Index ratio … 30 minute chart. a near ‘perfect’ BUY PATTERN.

with a buy pattern, that will signify ‘risk off’ for the big guys and therefore a sell equities.

if (the big if) this pattern fails then the likelihood of a continue advance is high …

monitoring the NYSE Inex

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 XLP / NASDAQ ratio complete a BUY pattern …updated 05/19/2019

05/19/2019 as you can see below, the buy zone was defeated by just a bit but, ultimately, it proved to be good support and the ratio is going UP which shows a risk off mindset w/ regards to the institutions. keep an eye on this ratio as it’s very important and can give us a heads up w/ regard to the overall health of the market.

I put the MONTHLY chart in there to show the much bigger pattern that completed at the lows.

02/28/2019 update: well, the target area shown in the original post was shown and held, somewhat. as the bouncing around started to happen from January 22, 2019 till Feb 21, 2019 it certainly created a nice triangle from the classic EWT. a-b-c-d-e and a resumption of the downtrend. We have rallied a little bit after the breakdown from the triangle (they usually occur in 4th waves – a guideline NOT a rule) so we have either finished or have one more sequence lower to finish – what I believe to be a zig-zag like correction.

if this analysis is correct, then we will bottom NOW or a little lower and the ratio will start to rise.

what does that mean? it USUALLY means stocks will start to sell off.

we are at a key/crucial juncture ..charts below

to show you the ‘power’ of this ratio, I’ve updated a 4 hour intraday chart of the xlp/nazzie ratio (candles) and the nazzie INVERTED (blue line) to show the synchronicity and how well they shake and jive together. note: every inflection point is timed almost exactly. THAT IS WHY THIS RATIO IS SO KEY and HELPS WITH RISK CONTROL

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if you have been following me for a while you will know that I really trust PATTERNS and also ratio’s w/ the patterns.

in this case, we have a near PERFECT BUY pattern on our XLP/NASDAQ ratio. Which means, the Staples (a source of risk off for the institutions) ‘should’ start outperforming the NASDAQ from a relative strength basis which ‘should’ cause the NASDAQ to sell off .. IF and ONLY IF the PATTERN works. As you can see below, we have two levels to watch (the one we are at right now) and then one a little bit lower …

my guess (as I NEVER know which pattern will or won’t work) is that the next sell off will occur ‘here’ or the other target a little lower. if we blow thru them w/ power and they fail then it might be game on again .. but let’s not get too hopeful yet. let’s see what our patterns do on the ratio first …

Bart

BUY pattern on the ratio

note the NASDAQ is inverted (blue line) in this depiction

WATCH THE RATIO’s

12/16/2018 – as shown before, the ratio of XLP (Staples) / NASDAQ and the PATTERN that completed gave us fair warning of this correction we find ourselves in .. is it the beginning of the ‘next’ bear market. I have no idea. Is it just the ‘buy the dip’ – I have no idea. I guess if you have 50 years you don’t care but if you have 2 weeks you might.  It’s all relative folks but we do want to find what the best entry/exit points are as we look to manage risk. that’s all I’m trying to do …

the big institutions have a risk on or a risk off mindset. we hear it all the time. ratio’s allow you to try and get a best guess of where they are … in this case the STAPLES / NASDAQ has helped – a ton.

so, where are we now? 

KEY: note the blue arrows. those are the extreme moves up in ‘risk off’ for the institution and then, as shown, the ratio stalls and then the band plays on … believe it or not, we haven’t reached that extreme yet so I simply expect the correction to continue until the ‘target zone 1’ is reached. If your a bull then this seems a logical place to stick your toe int he water else watch and wait for a MONTHLY SIGNAL REVERSAL CANDLE.  Else, we could go all the way up to Target Zone 2.   

One of the most important charts out there … R A T I O P O L A R I T Y

11/20/2018 – so, this ratio is running the show right now.  if you read the below NONE of this should be a surprise as the PATTERNS worked and the XLP/QQQ buy pattern has taken off, causing a risk off mindset and the NAZZIE to get blasted.  That being said, all is not lost. While I do think we have some more carnage to come, ultimately the ratio is going to smack right into a very strong trend line and the technical analysis concept of POLARITY should cause support or THE bottom for a GREAT BUY.  The chart below should give you and idea of why the area labeled ‘resistance’ should offer strong support for the institutions and offer a great BUY of the Q’s and technology.

let me know if you have any questions.

B


 

10/21/2018

note the ratio .. we have a pretty nice bullish engulfing pattern on the ratio which is precursor to potentially further weakness.  If looking to BUY the Q’s would definitely wait for a nice sell pattern or overhead resistance to be hit before stepping in …certainly appears to have some room to run.

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here’s the QQQ on a daily time frame w/ the target zone denoted. sure looks like another wave of selling should be starting to complete a 5 waves sequence.  Is that A or 1 … if A, then a rally should occur followed by more selling and then a BUY. If 1 then we have, potentially, a lot more downside to come.

I do not know or care which it is ….1 or A.  Just looking for a pattern.

Also, doing a monthly log below to look for key trend line support or breaks.

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In July, we noticed this pattern completing. Yes, we went 3 points thru but the RATIO held and popped big time today.  Watch the median line shown below on the XLP/QQQ and see if price goes thru the line then the sell off could continue.

Thanks!

Bart

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should have done this one before – not sure why I didn’t …

so, the NASDAQ looks unstoppable … we have sell patterns on the DOW, the S&P, the NYSE Index but the NASDAQ is moving into new territory and it sure looks like finishing/close to finishing a 5 wave sequence.  So, why not do the XLP / NASDAQ?  Honestly, I don’t know why I haven’t done this one before. I’ve always looked at the NYSE Index or the S&P versus the XLP. One would think that the high flyer would show tendencies to pivot UP or DOWN based on risk on/off mindset by the institutions, right?

so, here’s the XLP / NASDAQ and it paints a nice picture.

of note:

  • XLP/NASDAQ
    • note the AB=Cd pattern that is completing and showing a bullish hammer as of this past Friday’s close.
    • RSI – been pegged at the lowest levels since 2000 and has finally showed some bullish divergence.
    • we are BELOW the .786 retracement BUT we are not at new all time lows (vice the NASDAQ that is all all time highs)
    • there is another level for targets lower (.886 retracement and 1.618 extension) if this level gives away …
  • XLP/NASDA w/ the NASDAQ overlaid and INVERTED
    • NOTE – EVERY major pivot higher/lower has been at a pivot of this ratio .

Folks … don’t get complacent as there is a very large probability that the next move  – across the board – is down.

Just calling it like I see it …

Happy Father’s Day!

Bart