Energy is usually the last shoe to drop

CLIFF NOTES: below you will see a butterfly top coming into play in the XLE.  98 and/or 110 should act as major resistance.  Let’s take a look at the potential set-up’s coming into play:

  • DJ Transports have completed a MAJOR BEAR pattern w/ the AB=CD completing from the late 1800’s.
  • DJ Utilities have a MAJOR BEAR pattern just a little bit higher that should act as major resitance.
  • THE XLF (proxy for the financials) has completed a WEEKLY BEAR pattern … the banks usually lead us UP and lead us DOWN.
  • Parabolic Charts have shown the first sign of weakness (IBB, GOOG, PCLN, etc, etc) which usually results in weakness.  The Social Media darlings have “cracked”
  • Multiple Long Term 5 wave counts are complete on some very important big cap stocks
  • And, from a cycles perspective one of my mentors, Mike Jenkins at http://www.stockcyclesforecast.com wrote this:

The biggest cluster of cycles we will face for the next decade hit from April 14 to 23rd, but
not really ending until the solar eclipse on the 29th. In my life I’ve never seen anything like it
except perhaps for 1974. My guess is a Middle East War or major stock market collapse, or
major earthquake. I would be extremely defensive until we get to the May 2nd to 5th pivot.

So, the band can continue to play on but let’s trade what we see … the XLE is important  because it is usually the last to top in a bull market.

rotation

With that in mind we now present a BEARISH BUTTERFLY SELL PATTERN as shown …

I left the background of the chart black for Easter Color affect ...
I left the background of the chart black for Easter Color affect …

We have been watching this target per this post: http://bartscharts.com/2013/09/15/part-iv-sp-and-energy/

Main20140420115954

Main20140420120216

 

Main20140420120418

 

Stay tuned as this market is topping (has topped) folks and w/ the amount of evidence being shown, it’s time to seriously get defensive and take profit or be in cash.   Once these patterns complete …

 

Happy Easter — Bart

 

going thru the heavy weights that make up the S&P …

in Mid-December 2013 we went thru the top weighted (by percentage) sectors in the S&P after the most re-weighting … at the time, most of them were either finishing or approaching or hitting sell patterns.  As of this writing, the patterns have held w/ no significant failures or break-outs.  this is bearish … only time will tell if we have entered a CONTINUATION of the bear market that began in 2000.  here is the link to the post mentioned at the beginning of this diatribe:

the importance of the recent reweight in the S&P 500

updated charts showing where we are w/ regard to the patterns:

Main20140202114638 Main20140202114701 Main20140202114521 Main20140202114838 Main20140202114915 Main20140202114937

the importance of the recent reweight in the S&P 500

yesterday was a quarterly option expiration AND an important S&P reweighing .. our last  post at the sectors of the S&P 500 were dominated by technology, energy and financials … that changed, pretty substantially.  now, hot of the presses the sectors are:

  • information technology 18% : using VGT as a proxy.  see chart below.  SELL PATTERN complete/completing.
  • financials 16.4%: using XLF as a proxy.  see chart below.  SELL PATTERN complete/completing.
  • health care 13.1%: using XLV as a proxy.  see chart below.  no discernible pattern however it’s approaching PARABOLIC
  • consumer discretionary: 12.5%: using XLY as a proxy. see chart below.  no discernible pattern however it’s approaching PARABOLIC.
  • industrial 11.1%: using XLI as a proxy. see chart below. SELL PATTERN complete/completing
  • energy 10.3%: using XLE as a proxy.  see chart below.  no new high, an extension sell pattern complete at 88 but perhaps 97 is where it will go.

so, note the inclusion of health care, consumer discretionary and industrial and there close to parabolic states continues the advance. additionally, am using VGT and the NASDAQ as proxies for the IT sector.  70% of the S&P 500 are either approaching parabolic or SELL patterns are completing …

stand by …..

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financials
financials
health care
health care
consumer discretionary
consumer discretionary
industrials
industrials
energy
energy

 

Part IV and “your time is gonna come”

this is the Part IV post from a couple months ago:

http://bartscharts.com/2013/09/15/part-iv-sp-and-energy/

this energy sector needs to be watched … the OSX, XOI, XLE are painting  the same picture as they have gone up in the context of targets that have now been hit or are completing just a little higher. Crude, however, has been pretty weak … not widely reported is the fact that the Administration basically lifted economic sanctions on Iran so perhaps they are flooding the markets w/ their oil…who knows and that’s not for me to conjecture.

however, in the context of the S&P energy does make up roughly 10% of the index so, in order for the index to start moving lower we will need to see these patterns complete and start down.  they HAVE NOT yet …but they are basically in the zone

November 10 2013 XOI November 10 2013 OSX November 10 2013 Crude November 10 2013 XLE

Part 2 of Part 1-V on the S&P

Part 1 was a look around the world at different equity indices based on ETF’s:

http://bartscharts.com/2013/09/14/part-1-the-sp-500-but-first-we-need-to-go-around-the-world/

of note is the Global Equity ETF (ACWI) and the SELL pattern that is appearing as we showed in our last “around the world” update shown below. Overall, nothing to crazy but the analysis appears to have been correct.  Summary: NONE of the “around the world” indices have come even close to making new highs from the 2007-2008 time frame.

ACWI Butterfly Sell Pattern
ACWI Butterfly Sell Pattern

Part 2 was the banks and too big to fail:

http://bartscharts.com/2013/09/14/part-ii-the-sp-500-and-too-big-to-fail/

The targets w/in the 21-22 area are approaching … the XLF is close to being a sell if not already one.

XLF update
XLF update

Part 3 took a look at technology:

http://bartscharts.com/2013/09/14/part-iii-the-sp-500-and-the-influence-of-technology/

Palladium has an extremely nice sell pattern and multiple patterns were hit or are about to hit …NASDAQ futures have an extremely strong target and sell pattern coming in right here, right now

NAZZIE Futures Continuous Contract
NAZZIE Futures Continuous Contract

Part IV was energy

http://bartscharts.com/2013/09/15/part-iv-sp-and-energy/

this is the one sector that isn’t showing a clear SELL signal – yet.  As you can see below w/ the XLE a case can be made for another 10% higher or it needs to start down now…energy could be the one sector that holds this puppy up for now.

Energy, a case could be made for continued strength thereby delaying the move down in the S&P
Energy, a case could be made for continued strength thereby delaying the move down in the S&P

and finally, part V was the look at ratio’s and sector rotation:

http://bartscharts.com/2013/09/16/part-v-sp-and-sector-rotation/

the pattern has completed perfectly and even w/ the S&P making new highs, this pattern has held …. this is bearish for the overall equity market.

a turn in this ratio has been present at EVERY major inflection point since 2000.  a BUY in the ratio is a SELL in equities
a turn in this ratio has been present at EVERY major inflection point since 2000. a BUY in the ratio is a SELL in equities

 

CONCLUSION:

ACWI, XLF, NAZZIE, SELL pattern complete/completing.

XLP/SPX ratio showing a beautiful BUY (SELL equities) pattern …

US DOLLAR low in here or perhaps a little lower

ENERGY needs to be watched like a hawk….

Do you really want to be long this market?  The only way I would stay LONG is if all the above fails and, quite frankly, that could happen.  So, watch ENERGY and DOLLAR strength for first clues.

WEEKLY S&P CASH SELL TARGETS
WEEKLY S&P CASH SELL TARGETS

 

DAILY S&P CASH sell patterns appearing
DAILY S&P CASH sell patterns appearing

 

 

 

 

the upcoming week of 9/22 for the S&P

our S&P post last week of parts I-V spelled out the overall look and feel for the S&P as we approached and eclipsed new highs … we took a look at technology, financials and energy.  additionally, throughout the past weeks, we have walked thru the circle of life for fixed income, the dollar and certain commodities.  Additionally, we looked – globally – at the current state of affairs for the other equity indexes. this blog post will be a quick update to where I “think” we are and some key levels to watch over the next week …

  • Financials: a pattern did complete at the high for XLF at 20.92.  Higher targets also remain from 21.50-22.20.  Would really like those “higher” targets to be attacked to get a true feel of the market but, for now, realize 20.92 could be it on the financials.  if this is complete, then it does not spell “good” for the overall index.
  • Energy: as we showed in the last post a potential terminal target remains higher in around 97 on the XLE.  However, we also showed at pattern completing in/around 85.20.  that has hit and a break below 80 (weekly close below) would not spell “good” for the overall index. Crude sold off on Friday and the real test will be it’s “return to the top of the triangle trendline” to see if it bounces for the higher target shown in the past.  the $XOI and $OSX are also showing weakness at targets described in the past.
  • Technology: I am breaking down the overall technology look into the NASDAQ index (NAZZIE).  if  you look back at the “technology” post from last weekend you’ll see that we still have some higher targets 30+ points away.  Too early to tell if Friday was a high but would, again, certainly like the upper targets to get hit and for all three of the major components of the S&P to go down together.
  • I still feel that the “big guys” are going to “tip” their hand and “try” to rotate out of the high flyers and into the staples (deodorant, tooth paste, water, etc.).  I am watching this ratio like a hawk.  This is a perfect set-up for a BUY of the ratio which sets up a (HISTORICALLY) SELL on the S&P.  That target is a little lower and, again, would really like to see that level hit/targeted.

    XLP / $SPX ratio analysis
    XLP / $SPX ratio analysis

 

  • Last, I had the WONDERFUL chance to train w/ Joe Dinnapoli of http://www.fibtrader.com a couple years ago. Wonderful training and very very important information on the “internals” of the market and it’s structure and the importance of liquidity in the world of program trading, micro trading, the bid-ask and the false injections of cash that has occurred w/in the house of cards this market has produced.  Take the time to watch this series of videos: http://www.youtube.com/watch?v=MQed-Aqay5w  I also ask you to take a look at the picture/explanation in part 2 of 5 and in/around 10:38 and 13:01 for part 4 of 5.  The series is a couple years old, but still so extremely valid and important.  If you read my post a couple hours prior to the FED announcement you’ll find that I correctly surmised that the QE would continue … believe it or not, sooner or later, the illiquid nature of todays market will, ultimately, put us at risk for a potentially major move.  This is ONLY a probability and one that has, more than likely, a low chance of ever happening.  But education around potentialities isn’t so bad, is it?

I AM NOT DESIRING OR CALLING FOR A CRASH OR ANYTHING LIKE THAT …however, the market has been propped up by trillions of dollars and, therefore, liquidity is an issue.  If this is an issue then why not put some of the profits in the bank and let some or a little ride?

What if this DJIA chart is correct …. ?

DJIA SELL pattern completed/completing w/ potential targets depicted base on the lack of liquidity present in the market
DJIA SELL pattern completed/completing w/ potential targets depicted base on the lack of liquidity present in the market