Tag: xllp

XLP/NYA – January 15, 2025

BIG MOMENT of inflection here … this support needs to hold for a correction to unfold or we could be exploding higher.

For those of you who have been following this blog, you know how much I “lean” on the XLP/NYA ratio.

It’s one of the best tools to monitor ‘institutional money flow’ or ‘risk on- risk off’ appetite of the ‘big guys.’

Ratio goes UP then the numerator is stronger – XLP.

Ratio goes DOWN then the denominator is stronger – NYA.

Going up signifies rotation (the Staples are getting stronger from a relative strength perspective) and stocks correct or going down …

Going down signifies “risk on” as the institutions are rotating out of defensive names and have a more “riskier” appetite.

A few weeks ago, we did the near perfect PRICE and TIME corrective move in the XLP and the importance was the correction was the largest measured move correction since the XLP came on the scene in 1998. Pretty big deal …

At almost the same time, the NYA was smacking into the 1.618 price projection from the all time low and beginning of the NYSE. We had LONG TERM price projections hit in BITCOIN, Transports, Semi-Conductors, etc.

Time for a correction – right?

Hold your horses … for only the second time in 14 years we have penetrated a long term horizontal line of support and we are sitting right on two very important ratios.

Take note, the two times we did penetrate this level (appears to be two months in a row) we sprung back (the ratio) and it led to an almost 2 year correction.

So, PAY ATTENTION TO THIS LEVEL as it’s not a far stretch to believe that this level gets smoked to the downside and we vacuum down to the .786.

We are a BIG point of inflection … stocks stop here OR the can explode higher and higher.

WOW.

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.