Ratio analysis, key level hit on the XLP/ NYSE Index

we have a very KEY level of support on the XLP/NYSE Index ratio.

as you can see below … we have the measured move (dashed red line) equal to the largest correction in the ratio since the low in 2007 and w/ that the lowest level on the RSI in 12+ years. note, a bullish divergence does not appear to be needed for the ratio to find support …sometimes there was some bullish divergence and other times it just hit the support level and reverse higher. I do think it’s necessary to to take this into account.

then, we have a significant amount of math coming into this level w/ the .786 retracement from the last swing low hit last week.

lastly, we have key trend line support a little lower … this is a “good” trend line because you can see that it was respected as resistance when we copy/pasted the lower trend line onto the higher prices to create the blue trend channel … bottom line is to expect support in the ratio.

so now to the IF and THEN statement of using PATTERNS.

IF the ratio does find support THEN the equity market should correspondingly correct/move lower. ELSE, a blow thru to the downside of the ratio will make the market continue higher and, perhaps, w/ force.

we will be in that key decision making process – next week.

the second chart is just showing the NYSE Index overlaid on top of the ratio .. as you can see when the ratio finds support, the market corrects – every time.

XLP/$NYA update

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.

stay tuned …

Banks – HUGE support

Banks are very important to the overall health of the market … key support approaching! monitor closely …

blogged about the banks a couple weeks ago here: https://bartscharts.com/2020/09/09/banks-where-are-they/ since then, they have continued to lose strength and now the Banking Index has a very important BUY pattern which should hold and the ratio of the Banks/NYSE Index has key support a little bit lower.

banks lead us up and lead us down so these areas below are KEY to strength of the overall market. bounce here/little lower on the ratio and we should stabilize. if we cut thru these levels w/out a whimper and continue lower then i would expect continued pressure down the line …

Banks – where are they?

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 …

XLK/XLP update – Ratio Analysis and the power of waiting – update 11/5

11/05/2020 – yes, some insanity is ongoing everywhere. that being said, we trust PATTERNS and tune out all the noise. In this case, we had the expected reaction to the resistance levels sighted below and, now with this rally, we have another SELL pattern coming into play. SELL THE RATIO = SELL TECH.

NOTE – WE HAVE A LOT OF THRUST AND BREAKAWAY GAPS COMING INTO THIS LEVEL. this begs “caution” so, w/ the euphoric tech rise, it’s not a stretch to expect this level to get tagged and, frankly, get blow over and fail. but, that being said, it is a SELL XLK/XLP ratio so .. .watch closely.

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last week, blogged about parabolic arcs and showed how we could use geometry to POTENTIALLY (the only operative word in investing) to look for inflection points. if your new to the blog, you’ll find a chart that has been replicated a couple times over past couple weeks /months for an area or zone of resistance. in fact, here’s a print to screen where JC (www.allstarcharts.com) and I were talking about this level … we discussed it ramifications to manage risk. this level was known 4-6 weeks ago and was discussed about it being respected. the past couple days market action can tell you why this was a smart move …

if this zone held, then technology would lose some steam (so to speak) and rotation into less volatile names (staples) would occur. at my last count we had 6 different projection techniques and math coming into this area.

when it broke above it – on a daily basis – I was somewhat surprised but it’s all probability, right? so, I blogged to wait for an open and a close above our targeted area/zone. we DID NOT get an open and a close above our area so the resistance was still on .. that is what I mean waiting for a signal reversal.

signal reversal candle (bullish) = the ‘high’ of the ‘low’ candle is taken out on close

signal reversal candle (bearish) – the ‘low’ of the ‘high’ candles is taken out on close.

when we come up w/ levels, waiting for an open/close above or below a certain level is the smartest way to play it. this is what was recommended … we have a LONG time before the month ends (for the monthly candle) but we can monitor via weekly and daily …

no need to rehash old news .. the zone has been hit. you read the blog – to find out where it COULD (there’s that probability connotation again) go …

using the basics, for now, I have used measured move corrections (blue and orange arrows) and rudimentary retracement techniques to come up w/ an initial set of targets.

folks, this might not even be the top to do all this work … it COULD GET ALL REVERSED TOMORROW.

keep the erasers and pencils ready, this is going to get interesting …

thanks for reading – Bart

XLK / XLP – still has major resistance just a little higher!

we had a sell off on the ratio a couple weeks ago BUT there was not follow thru and we still have the lingering level just a little higher which is the real test … again, until we have a strong weekly close above this level I’m in the conservative/flat camp as far at the NASDAQ and Technology goes …

the ratio has HUGE support

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.

be safe out there …. Bart

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 …