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

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

Continuing to Monitor the XLP / NYA important ratio …

did this for Andy and the gang @seeitmarket: https://www.seeitmarket.com/are-consumer-staples-signaling-a-volatility-omen-17331/

here’s an update as of Friday’s close:

If I learned anything from getting my CMT it was the power of ration analysis.  X/Y …. If X is stronger the chart goes up and if Y is stronger then the chart goes down. And, since we are charting securities guess what works on them –the PATTERNS.  So the theory goes IF the insititutions are risk off the chart goes down and volatility is suppressed.  If the institutions are risk adverse then the chart goes up and volatility picks up and stocks sell off.

Thesis:

  • MONTHLY of XLP / NYSE Index w/ candles being the ratio and the blue line being the NYSE Index.
    • Note, at EVERY major inflection of the NYSE Index the RATIO pivoted … it either inflected to go up or down BUT every move of the NYSE Index respected this move.
  • Monthly XLP / NYSE Index.
    • Note, most oversold in 6 years and slammed into the .382.  Weekly bearish close … did expect it to respect this area and w/ Bradley Date, Martin Armstrong Directional Change and the note from Mike – along, and most importantly, the PATTERNS I did expect this to find support and give at least a daily BUY signal.  It has not done that …but all is not lost.
  • Monthly XLP/ NYSE Index
    • Note, if we don’t find support here then we have a measured move target a little lower and, ultimately the big green target …
  • Daily XLP/NYSE Index
    • Note, the time component (somewhat of a 3 drives to a bottom but still in line w/ ‘time’ of every rally ….
    • Note, the 1.618 w/ an AB=CD (nice time on AB=CD) right at our .382 from the all time low
  • Intraday (5 minute) XLP / NYSE
    • Yes, we closed at the lows … but yes we ‘really didn’t’ break the lows so in order for this market to pivot and correct next week believe this level needs to hold and rally tomorrow morning.

 

Conclusion: believe this ratio remains important for the overall health of the market and if it can hold these lows then volatility should uptick and the market sells off. IF we breakdown from these levels THEN we’ll seek the next lower target and the market will continue top march up a wall of worry.

interesting … the RATIO of USD / CRUDE

folks, need to pay attention  here … below you’ll find two charts:

  • RATIO of $$$ / Crude Oil (continuous contract) – note the nice sell pattern that completed a couple months ago.
    • now notice … we are hanging by a thread for USD to continue to weaken against Crude
  • Ratio of $$$ / Crude oil (continuous contract) – note the nice correlation of the tops/bottoms in the ratio and the moves in crude (makes sense)

All I’m saying is perhaps .. crude is going to continue to strengthen – relative strengths basis – against the USD?

WATCH CLOSELY …

B

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