WATCH THE RATIO’s

12/16/2018 – as shown before, the ratio of XLP (Staples) / NASDAQ and the PATTERN that completed gave us fair warning of this correction we find ourselves in .. is it the beginning of the ‘next’ bear market. I have no idea. Is it just the ‘buy the dip’ – I have no idea. I guess if you have 50 years you don’t care but if you have 2 weeks you might.  It’s all relative folks but we do want to find what the best entry/exit points are as we look to manage risk. that’s all I’m trying to do …

the big institutions have a risk on or a risk off mindset. we hear it all the time. ratio’s allow you to try and get a best guess of where they are … in this case the STAPLES / NASDAQ has helped – a ton.

so, where are we now? 

KEY: note the blue arrows. those are the extreme moves up in ‘risk off’ for the institution and then, as shown, the ratio stalls and then the band plays on … believe it or not, we haven’t reached that extreme yet so I simply expect the correction to continue until the ‘target zone 1’ is reached. If your a bull then this seems a logical place to stick your toe int he water else watch and wait for a MONTHLY SIGNAL REVERSAL CANDLE.  Else, we could go all the way up to Target Zone 2.   

should have done this one before – not sure why I didn’t …

so, the NASDAQ looks unstoppable … we have sell patterns on the DOW, the S&P, the NYSE Index but the NASDAQ is moving into new territory and it sure looks like finishing/close to finishing a 5 wave sequence.  So, why not do the XLP / NASDAQ?  Honestly, I don’t know why I haven’t done this one before. I’ve always looked at the NYSE Index or the S&P versus the XLP. One would think that the high flyer would show tendencies to pivot UP or DOWN based on risk on/off mindset by the institutions, right?

so, here’s the XLP / NASDAQ and it paints a nice picture.

of note:

  • XLP/NASDAQ
    • note the AB=Cd pattern that is completing and showing a bullish hammer as of this past Friday’s close.
    • RSI – been pegged at the lowest levels since 2000 and has finally showed some bullish divergence.
    • we are BELOW the .786 retracement BUT we are not at new all time lows (vice the NASDAQ that is all all time highs)
    • there is another level for targets lower (.886 retracement and 1.618 extension) if this level gives away …
  • XLP/NASDA w/ the NASDAQ overlaid and INVERTED
    • NOTE – EVERY major pivot higher/lower has been at a pivot of this ratio .

Folks … don’t get complacent as there is a very large probability that the next move  – across the board – is down.

Just calling it like I see it …

Happy Father’s Day!

Bart