I’m watching 4 things …

PATTERNS on the ES, $NYA, Banking Index and Yen to tell me if we break out to new highs.

  • Banks are rolling.  That’s bullish – get thru level shown then we should surge higher
  • Yen, after an entire 6 weeks of doing nothing – EXPLODED.  119.80 line in the sand
  • ES “basic” AB=CD complete.
  • NYA shows a possible count calling for lower

Close today will rank in the “big deal” category in my very humbled opion.

Just a pattern guy … no idea what the jobs report, or rates, or any of that “stuff” means …

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Continuing to watch the components (>10%) of the S&P 500 – an update

CLIFF NOTES: the biggest development of this past week was the CLOSE above our pattern level on the XLF.  It is my belief, and history has shown, that the banks LEAD us UP and LEAD us DOWN. As long as the banks are stable, this market will continue it’s “Wizard of Oz’s” climb …also, my last post had the “white flag” at the bottom as I have given up and thrown in the towel to the bear patterns.  It’s different this time …

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CTRL-ALT-DELETE. The S&P 500 sectors, AGAIN

CLIFF NOTES: the “chart of my lifetime” is still just that – an amazing chart of, quite frankly, my lifetime.  I think it’s safe to say that the pattern from genesis of the Dow Jones Transports has been defeated.  A pattern that took 45,000 days (+) to form and complete.  Again, please, let that sink in … read it again, and one more time.  In the world of probability this was a highly probable pattern that should have at least cause some pullback congestion ….!  NOPE … not even close.  Take a look at the BREAKAWAY MOVE and the explosion from the pattern area.  Reminds me of the GOOGLE short at 921…if you remember, that level held for 6 months!  Then exploded higher in a 100 point gap that was definitely egg in my face.  O U C H …but, this pattern was less than 10 years old and it held GOOG for 6 months. Please, again, go back a couple sentences …the Transports pattern was 100+ years old.  The PATTERN didn’t even hold it for a week …

CLIFF NOTES 2: I’ve gone back thru BA, AAPL, WYNN, PCLN, FB, IBM, LNKD, AMZN, SBUX, etc and those patterns WORKED and while they have all retraced the initial crack lower they sure do appear to be ready to surge forward w/ the rest of the market.

CLIFF NOTES 3: I’m baffled, a little concerned and well quite angry.  Why?  Not because the PATTERNS failed or didn’t….that’s called probability folks.  I’m sharing my emotions because this puppy NEEDS TO CORRECT and that’s a good thing.  Mentors of mine that have traded for 40+ years have taught me (which I believe) cycles that are extremely reliable and some of the most BEARISH CYCLES that we have ever witnessed (if you know it or not) hit in MAY and NOTHING happened.  Read that last sentence again … it was, literally, the perfect storm of cycles. Am I questioning the cycles – nope.  I AM QUESTIONING WHAT THE HELL IS GOING ON !!!!

CLIFF NOTES 4: if you have read this far. thanks.  so, in order to do what the subject line states I am spending this SAT AM W/ you to reevaluate the S&P 500 sectors that “weigh” more than 10% and, as I type, I have removed any bias from patterns or talking head pundits or any outside influences.  It’s me, the charts and 10,000 hours + of chart time (see this link: http://www.dailymail.co.uk/news/article-1078842/Practice-makes-perfect-Why-takes-10-000-hours-success-according-academic.html )

Here we go …as of 5/31/2014

1.  IT makes up 19% of the S&P 500.  I have chosen to use the VGT ETF as a proxy.

  • I see blue arrows which represent maximum measured moves since 2009.  We are completing one of those moves up against the 5 year trend line.
  • I see a black/yellow triangle which represents TIME and we are 7 weeks past the last major move w/out a “nice” correction.
  • I see BEARISH DIVERGENCE
  • I see an increase of volume which reminds me of FOMO “selling at the bottom” and “buying at a top”
  • CONCLUSION: resistance and correction ahead.  Expect anywhere from 94-100 to hold this puppy back.  64 is not out of the question for a correction.
IT ETF 19% of S&P 500
IT ETF 19% of S&P 500

2.  Financials are 16% of the S&P 500. I have chosen XLF as our proxy vehicle for this sector

  • I see the “basic” AB=CD (blue arrows) holding, so far.
  • I see bearish divergence
  • I see very very low volume
XLF Financial ETF
XLF Financial ETF
intraday XLF
intraday XLF

3.  Health Care is 13.3% of the S&P 500.  I have chosen the XLV as a proxy

  • I see NO PATTERNS nothing but a straight up rocket ship.  I reference Sir Isaac Newton and the law of gravity.
  • check out the RSI … so much for bearish divergence.  A YEAR OF IT! But, HERE IS A KEY POINT – NOTE THE SPIKE IN THE BEARISH (RED) VOLUME AT THE LOWS (BLUE SQUARES) EVERY TIME THE SELLING SURGES THE ETF BOTTOMS.  LOOK FOR THAT AGAIN ….

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4. Consumer Discretionary is 11.9% I have used XLY as the proxy vehicle.

  • I see STRAIGHT up w/ a POTENTIAL BUTTERFLY SELL PATTERN FORMING.
  • I see bearish divergence
  • I see an intraday sell pattern.

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5. Industrial s make up 10.7% of the S&P 500. I have chosen XLI as the vehicle proxy.

  • I see the same picture as the past couple. An amazing and powerful bull move up w/ no hint of corrections at all. some daily patterns are present in/around here.

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6. Energy makes up 10.5% of the S&P 500. I have chosen XLE as the vehicle proxy.

7.  VIX – it’s different this time and there is NO FEAR IN THIS MARKET – NONE.  All I can say (note: bold,underline, italicized) is REALLY ?????

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8.  I have shown the importance of ratio analysis and especially the XLP/SPX ratio.  I expected it to be making new lows based on the equity action – NOPE, it’s showing remarkable strength which tells me the “big boys/girls” are rotation into this sector.  Watching the “standard” .618 and .786 retraces to hold this pullback. If we go into new lows the equities will continue to surge …

XLP / $SPX ratio
XLP / $SPX ratio

 

 

 

 

the EUROZONE the P I G S and the ECB

CLIFF NOTES: the yields on the Italian and Spanish bonds had a big jump last week. The question is – will the ECM support the bonds?  These are price swings that must be watched closely.  I honestly don’t know IF (the BIG IF) the ECB can support the market but it must be watched.

I’ve attached a chart that was done on the Social Media ETF showing the amazing increase in VOLUME as the sell PATTERN was completing.  Folks, if we took away the price of the EZU and SOCL ETF the volume would almost look exactly the same.  Here’s the picture of the SOCL at the highs:

notice the volume increasing as the "end was near"
notice the volume increasing as the “end was near”

the SOCL is off those highs 30-40%.  Now take a look at the picture w/ the EZU ETF:

notice the volume ..almost exactly like the SOCL.
notice the volume ..almost exactly like the SOCL.

next we overlay the XLF (financial ETF) w/ the EZU and it sure looks like this ETF is one big financial institution – as the banks go, so does the EZU and if you go back some posts you’ll see the XLF completed it’s sell pattern at 22. So …this bears watching. We do have a little more to go for the EZU SELL PATTERN but, w/ the EZU so synced w/ the XLF it might not get there.  Now, the banks could very well EXPLODE UP thru the 22-23 level and the band will play on. But just remember, we are at an inflection point and it’s time to watch this closely ….

EZU w/ XLF overlaid
EZU w/ XLF overlaid

Are the PIGS good to go (Portugal, Italy, Greece, Spain) out of the woods or not…? Believe this upcoming pattern will tell us everything we need to know….

Chart of the Day … the BEARISH PATTERN completing on XLF

CLIFF NOTE: the classic AB=CD sell pattern is complete on the XLF.

my last post on XLF depicting this pattern: http://bartscharts.com/2013/09/14/part-ii-the-sp-500-and-too-big-to-fail/

it’s all probability and, quite frankly, the probability certainly appears to be in the favor of the bulls …

so, the financials “broke out” and, as a PURE pattern recognition chartist they broke out right into a bearish sell pattern …

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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:

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remove bias, trade what you SEE – JP Morgan

does ANYONE remember the EMOTIONS of March 2009?  do you think ANYONE in their right mind would recommend a BUY on the XLF in MAR 2009?  well, just as a reminder here it is …

XLF at the LOW
XLF at the LOW

why am I pulling this thread right now?  well, the past couple days I have received some very convincing emails around how WRONG I am w/ regard to the PATTERNS that are appearing in the US Equity Market.  Here’s the dirty little secret .. I am NOT wrong because I just look for PATTERNS.  the PATTERN will work or it won’t. Over time, this EDGE will show profitability IF I manage the RISK.

a couple years ago I had the amazing opportunity to present to the entire MTA (www.mta.org) on PATTERN recognition as an “emerging CMT.” I presented a bunch of charts showing some GREAT set-ups based on PATTERNS.  No moving averages, bollinger bands, MACD, stochastics or any of that “stuff.”  Frankly, I believe they work but, honestly, I don’t understand them that well.  I like numbers, music and geometry.

here’s the chart that I presented on the BUY of JPM.  If you want me to go over the details of the chart, let me know by email and I will explain.  The PATTERN that was present was a BUY at 15 dollars.  BUY JPM at 15 …

I am presenting this, again, because at the HEIGHT of BEARISHNESS I was a BULL!  

JPM 2009 LOW
JPM 2009 LOW

here’s the AMAZING SELL PATTERN appearing on JPM:

JPM SELL Pattern ...
JPM SELL Pattern …

So … the SHORT PATTERN that has appeared on JPM is AWESOME!  Why AWESOME?  Because … the tightness of the 60-61 level has all the RATIO’s to create a pattern coming together.  It’s that SIMPLE.  When the “ratio’s” come together so tightly we can MANAGE RISK BETTER ….

one last, the .618 price projection (from the all time low-all time high-2009 low) was hit, exactly, today.  So, 58.48 could do it.

if we get above, say, 64 this puppy could “cook off” higher and the band will play on and I’ll continue to eat my “bearish pumpkin soup.”

make it a GREAT 2014!

BART

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

 

follow up to Part II w/ Led Zeppelin “your time is going to come”

last post on the banks:

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

You Tube link to Led Zeppelin:

http://www.youtube.com/watch?v=fssblRRCgmg

updated chart .. certainly looks like the banks “time is going to come – soon or now”

banks PATTERN complete/completing
banks PATTERN complete/completing

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