revisiting the XLP/SPX ratio … AGAIN in June 2015

time for another update … take note, HIGHER LOWS in the ratio and it bounced off the .786 retracement w/ a nice MONTHLY hammer.  It sure appears this ratio is about to go up, which should put pressure on the stock market to move higher.

this has taken a LONG time to itself out ….

potential count for the ratio - note the higher bottoms since 2009.
potential count for the ratio – note the higher bottoms since 2009.

 

inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX
inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX

one last, below, showing the importance of this ratio and the monstrous divergence present.

  • w/ the Equity market soaring to new highs the RATIO should have been falling like a stone.  IT HAS NOT….again, in fact, it has made higher lows. This is a very important sector rotation development that needs to be paid attention to closely.  It WILL resolve itself.
EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio....
EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio….


 

folks, bringing this up, again, because this divergence is MONSTROUS.

in order to show the divergence and how something is “not quite right in toon town” I’ve actually inverted the ratio to show the S&P 500 on top this time.  t

the only reason is it shows the amazing divergence present .. when you look at the chart below notice the perfect synchronicity between the S&P500 and the S&P500/XLP.  but notice around 2011, the dance breaks up … that’s a big deal to me and while it’s true you obviously can’t fight the fed and it’s different this time what I believe it tells us is the “smart money” has stayed in staples or haven’t jumped into this amazing bull market as much as anyone thinks.

notice the divergence!
notice the divergence!

now, here’s the same ratio but this time we have the STAPLES has the numerator … note, when this ratio BOTTOMS the S&P 500 TOPS and when this ratio TOPS the S&P 500 bottoms.  EXACTLY … the theory is the institutions move in/out of “defensive” names during times of volatility so we expect the relative strength of the XLP’s to increase during bear markets / sell-offs (the ratio goes up) and decrease during bull markets/rallies (the ratio goes down)

the ratio HAS NOT GONE DOWN during the past 2 year rally phase … tells me the institutions have kept their powder dry.

XLP / SPX - note divergence and NO NEW LOWS on the ration ....
XLP / SPX – note divergence and NO NEW LOWS on the ration ….

just a matter of TIME …

the bladder of the fish and, well, Soybeans

had a “google hangout” w/ JC today and we zipped thru, easily, 6 different asset classes from stocks, commodities, single stocks and currencies in roughly 10 minutes.

“check this out – boom boom boom” and “blah blah blah” – and we were done.

question .. how long do you think it would take non-chartists?  hours …? just saying.

anyway, we took at look at long term soybeans and what we need to focus on is the POWER of a MEASURED MOVE on a long term chart.  in the chart below you’ll see blue and orange arrows.  they represent the MAXIMUM correction of Soybeans on this 40 year old chart.

folks, when you have a LONG TERM measured move that sits right on a .618 retracement  – you have high probability.  If you don’t believe me … just look at the chart.

every major correction has either been a blue or orange arrow …

measured moves of Soybeans
measured moves of Soybeans

 

W H Y ?

the Vesica Piscis of course (the bladder of the fish)

Vesica Pisces
Vesica Pisces

so, look folks, you can believe me or not … but – HONESTLY – I chose the black dashed move to being the construction of the Vesica Pisces for this long term soybean chart. And, because I believe in my edge – and w/ full disclosure I had NEVER done this for Soybeans I constructed the VP from that one corrective move from 1988-1991.

as you can see below I built the picture above and then ….. use sacred geometry to measure the fractals of the square roots of 2,3,4,5 which are represented by pink/black/blue/orange arrows and then transposed them to PRICE in the lower right hand corner.

and, guess what … see that black arrow?  THAT is what created the measured moves above … and, additionally, as you can see, I used the orange arrow from the low in 1999 to the EXACT high in 2012.

now, believe it or not, you can use any major swing .. they are all related from a proportions and fractal point of view.  I trusted my eye and looked at where this correction was occurring and trusted my “hunch” that this was the right vector to use as the seed.

if you get the chance … use the vectors as time.  (hint hint)

featured-images_s181

 

the bladder of the fish and the Vesica Pisces
the bladder of the fish and the Vesica Pisces

 

SPOILER ALERT:

The mathematical ratio of the width of the vesica piscis to its height is the square root of 3, or approximately 1.7320508… (since if straight lines are drawn connecting the centers of the two circles with each other and with the two points where the circles intersect, two equilateral triangles join along an edge). The ratios 265:153 = 1.7320261… and 1351:780 = 1.7320513… are two of a series of approximations to this value, each with the property that no better approximation can be obtained with smaller whole numbers.

21:11 Simon Peter went up and drew the net to land, full of large fish, a hundred and fifty-three and although there were so many, the net was not torn.

here’s how powerful the XLP/SPX ratio is …

below are a couple intraday charts of the “ratio” of XLP/SPX.

note, ALL the major inflections (even intraday) are equal/opposite the overall market.

so, where does that leave us?  Well, you can see a minor buy pattern (two blue triangles) but I favor lower where the .618/.786 overlap.  If/when this ratio hits that level I would be a seller of the SPX.

Main20141023214158 Main20141023214555

ratio’s are really powerful

been blogging a BUNCH about the importance of the XLP / SPY ratio.  Why?  Well, EVERY turn since 2000 has been nearly exact to the ratio turning up or turning down.  here’s the chart:

XLP / SPY ratio w/ S&P overlaid on top of it ... NOTE divergence since 2012
XLP / SPY ratio w/ S&P overlaid on top of it … NOTE divergence since 2012

folks, it doesn’t get much better than that … the CANDLES is the ratio of XLP / SPY.  The BLUE LINE is the S&P 500.  the chart time frame is monthly.  EVERY PIVOT IN THE STOCK MARKET HAS BEEN A CORRESPONDING PIVOT EQUAL/OPPOSITE in the ratio. (move up in stocks equals move down in ratio and vice versa)

why is this important … well, check out the VIX and the ratio

XLP / SK&P w/ VIX overlaid on top of it
XLP / SK&P w/ VIX overlaid on top of it

here’s the deal — RATIO ANALYSIS is a unique look into the key hole of the INSTITUTIONAL rotation … and, my take is the ratio should have been sreamcing down while the S&P ripped to new highs.  IT DID NOT … that has been something I have tried to resolve for almost two years …

now, why is this low so important in the ratio?  well, take a peak at the RSI BULLISH support zone below:

XLP/SPY ratio found support on bullish RSI zone
XLP/SPY ratio found support on bullish RSI zone

and, then you could have this as your count …

a POTENTIAL count for the XLP / S&P which shows higher
a POTENTIAL count for the XLP / S&P which shows higher

so, let’s review:

  • the CHARTS show
    • when the XLP/S&P 500 ratio pivots so does the market …
    • we had a very noticeable divergence in the ratio and the S&P 500 as the S&P 500 screamed to new highs
    • we have shown that the VIX pivots w/ the ratio
    • we have shown the ratio is at bullish RSI support zone …

all the above tells me 1) volatility is here to stay, 2) expect pressure on the equities and 3) I could and might be completely wrong and that’s OK!

make it a great weekend and rock on, ok?

Bart

EURO and 138 …

usually try to stay away from blindly buying or selling the .618 retracement … that number is the usual first introduction of people using leading indicators and sometimes it works and sometimes it doesn’t and people eventually say “hogwash” and run away from these techniques — GOOD!  however, when we have projections or overlapping patterns then I get interested in this level.  here’s the .618 retracement overlapping patterns:

overlapping patterns into .618
overlapping patterns into .618

 

Daily EURO look
Daily EURO look

here’s where the 138 gets interesting ….

1) the Euro vs USD, believe it or not, has been down 138 days.  and, having seen my past posts on the 66.6 months for the S&P and 1920 days since the low and the concept that PRICE equals time then if we do a calendar day count from the last high on the EURO on May 09, 2014 we get 138 days.  How do we convert that to PRICE in the FX ?  Well, we really don’t care about decimal points in the world of vibrations .. we care about the NUMBERS so convert like this:

  • HIGH was 1.3989 or 1.4000 (work w/ me people)
  • 1.4000 = 4000
  • 138 days = 1380 (also pretty close to 1382 or 1.382)
  • 4000-1380 = 2620
  • 2620 = 1.2620
  • 4000 square root = 63.25
  • (63.25-12)^2 = 1.2626

so, not trying to be a hero here BUT back when the dollar was at 79 I was recommending the BUY … but now, everyone and there brother is lighting up the twitter universe, CNBC, Yahoo Finance, Marketwatch and blah blah around the DOLLAR DOLLAR and the bearish sentiment for the EURO is massive … a perfect time for the EURO to bounce ….

Carving out a bottom folks … and, while I remain extremely bullish on the dollar am expecting the classic 3 wave corrective movement so … am going to let the .618 or .707 (square root of 2 – 1.4142, 1/1.4142 = .707) level prove it and then look for an OPPORUTNITY to BUY the pullback that SHOULD be a classic 3 waves …

EURO and the number 138
EURO and the number 138

revisiting the XLP/SPX ratio … AGAIN

folks, bringing this up, again, because this divergence is MONSTROUS.

in order to show the divergence and how something is “not quite right in toon town” I’ve actually inverted the ratio to show the S&P 500 on top this time.  t

the only reason is it shows the amazing divergence present .. when you look at the chart below notice the perfect synchronicity between the S&P500 and the S&P500/XLP.  but notice around 2011, the dance breaks up … that’s a big deal to me and while it’s true you obviously can’t fight the fed and it’s different this time what I believe it tells us is the “smart money” has stayed in staples or haven’t jumped into this amazing bull market as much as anyone thinks.

notice the divergence!
notice the divergence!

now, here’s the same ratio but this time we have the STAPLES has the numerator … note, when this ratio BOTTOMS the S&P 500 TOPS and when this ratio TOPS the S&P 500 bottoms.  EXACTLY … the theory is the institutions move in/out of “defensive” names during times of volatility so we expect the relative strength of the XLP’s to increase during bear markets / sell-offs (the ratio goes up) and decrease during bull markets/rallies (the ratio goes down)

the ratio HAS NOT GONE DOWN during the past 2 year rally phase … tells me the institutions have kept their powder dry.

XLP / SPX - note divergence and NO NEW LOWS on the ration ....
XLP / SPX – note divergence and NO NEW LOWS on the ration ….

just a matter of TIME …

Let the market tell you – EURO quick look

CLIFF NOTES:

  • follow the black dotted line to see where the major level has been for the Euro.
  • Then, follow the orange line.
  • Additionally, note a nice little cycle coming in at 778 days.  We are off by a week, but that’s OK and – quite frankly – the reason is a little too esoteric for this discussion.  we are still in the time zone for a bounce.
  • Note, from the beginning of the BULL market that started in 2000 we have used the “standard” 1×1, 1×2 and 2×1 angles but the KEY is we have oriented them to the plane of the move up that began the bull market. Follow the bouncing ball and we’ll see that the 2×1 caught the July 2012 move and now we are approaching the .618 retrace and the trend line.
  • Bottom line: EURO bounce coming based on 1) structure, 2) “basic” and “advanced” time cycles, 3) trend line from the beginning of the bull market in 2000 4).618 retracement  5) the 1/8 increment of the signal reversal candle down completes a little lower and 6) we are developing bullish divergence.
  • WAIT to 1) short the upcoming bounce or 2) let the market tell you a bottom is in place and then buy the first pullback that should have a 3 wave structure . (NOTE the only correction so far has been a flat.  by the law of alternation, we will have a triangle or ziz-zag appear.  so WAIT for the bottom…

 

EURO vs USD weekly
EURO vs USD weekly

 

EURO vs USD Daily
EURO vs USD Daily
EURO vs USD 30 minute
EURO vs USD 30 minute

Would you SELL or BUY this chart?

Been active on Twitter and for my readers about some cycles hitting and square outs occurring and, well, blah blah blah.  So as any technician is EXPECTED to do when the PATTERN has failed pretty dramatically, I hit “erase all” and went back to work.  Asked myself … so, if the PATTERN SELL has failed then would you BUY it?  In order to answer that question I inverted my chart and simply said – would I BUY this chart in it’s inverted state?

Would you BUY or SELL this chart?
Would you BUY or SELL this chart?

bunch of cycles coming together …but who cares

how many institutions are there out there ….?  perhaps 30-50K?  and, if you think about it they own 10MM+ shares of the big names.  the “big names” have, on average, say 5MM shares / day traded.  so, what happens if they try to get out of a non liquid market that has been manipulated by “buy” and “sell” programs …?  That’s a liquidity problem … but, perhaps I am the only remaining individual on the earth that thinks this market can correct — 20-30%.  I’m alone on an island …

here’s some more time/price coming together.

my pivots are 2020 and 1988 …

amazing …

more time and price coming together
more time and price coming together