XLP / S&P 500 – support here is justified and, perhaps, a signal of volatility to come? UPDATED 11/04/2018

11/04/2018 – back on June 09, 2018 we saw this – almost – perfect pattern hit support.  it’s the ratio of XLP / S&P 500 – we use ratio analysis to look for ‘risk on’ or ‘risk off’ mindset from the big dudes. in times of ‘risk on’ the ratio will go down as the big dudes / dudettes are not in defensive names (like staples) and when the ‘risk off’ mindset is present then the ratio will go up. i.e. the XLP is ‘outperforming’ from a relative strength perspective.  the ratio completed a harmonic BUY pattern back in June and it took another 4 months before the market topped.  one could conceivably say the rotation occurred in the summer.  I’m posting the updated chart below … try and follow the bouncing ball of CONFIRMING indicators that the ratio was bottoming ….

where are we now? as you can see on the daily below we were DEFINITELY being warned w/ another near perfect BUY pattern on the ratio 10/04/2018.  it exploded higher … I see a little more consolidation/ corrective form in the ratio an then another move higher to complete an inner 5 wave sequence.  that’s when the ‘real’ pattern emerges.  I DO NOT KNOW, yet, if this is an Elliott A-B-C corrective move (bullish for stocks) or a 1,2,3,4,5 wave sequence that foreshadows the ratio going higher (bearish for stocks) … were just going to have to chill and wait to see what unfolds.

here’s the ratio ‘dates’ on top of the S&P 500 cash.  again, somewhat in no mans land as we wait for the next BUY or SELL pattern to emerge.  But, in the end, believe the ratio gave us ample time to position our portfolios accordingly – either the bear or bull you are. I’m neither … just a pattern recognition dude using some crayons to draw cool pictures and patterns.

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there is a different look/feel to the XLP / SPX versus the XLP / NYA. If you look at the chart below, you’ll see we did a pretty tight consolidation from 2011-2016 in the XLP / SPX.  It’s a ‘perfect’ sell pattern at “C” that complete and then the ratio fell out of the sky.

i’m curious at the lack of follow thru w/ regards to the S&P 500 (not making new highs like Russell, NASDAQ, etc) so I decided to take a look at this ratio instead of NYSE as the denominator.

as you can see we have some key observations:

  • take the time to study ‘past’ retracements as ‘sometimes’ the same ratio/vibration (remember that’s all it is – vibration) is present. In this case we have the .707 retracement level present at the high and now here at the lows
    • 2
    • Square Root of 2= 1.4142
    • 1/1.4142 = .707
  • the harmonic 1.27 is present in that 1.27*AB = CD
    • 1.618
    • square root = 1.27
  • note the blue measured move arrow from the XLP inception in 1998 is present in this correction
  • the MONTHLY RSI is at the lowest level since the inception of the XLP and this ratio of XLP/SPX
  • THE TIME OF THE CORRECTIVE MOVES OF THE RATIO ARE EQUAL

what am i trying to get at? nothing more than I’m very cautious of any further up move in the markets (for now) .. .historically, when the XLP starts to perform it signals a ‘risk off mindset’ of the big institutions and volatility starts to rise …

while I DO NOT think the bull market is over by any stretch, I do think that another move lower is in tune (note the music reference :)) w/ the form, balance and proportion we are used to seeing from a corrective nature.

Bart

New York Stock Exchange Index BUY patterns coming into play

I know the DJIA, S&P, Russell and all of that is important.

but, for me, to get a really good look at everything – I use the New York Stock Exchange Index.

why?

“The NYSE Composite is a stock market index covering all common stock listed on the New York Stock Exchange, including American depositary receipts, real estate investment trusts, tracking stocks, and foreign listings. Over 2,000 stocks are covered in the index, of which over 1,600 are from United States corporations and over 360 are foreign listings; however foreign companies are very prevalent among the largest companies in the index: of the 100 companies in the index having the largest market capitalization (and thus the largest impact on the index), more than half (55) are non-U.S. issues.[1] This includes corporations in each of the ten industries listed in the Industry Classification Benchmark. It uses free-float market cap weighting.”

It’s big and it just gives a good feel for the overall market.

It’s coming into a VERY key area of support shown below.  IF YOUR A BULL THEN THIS IS THE AREA TO GET LONG (with a stop) and if the level fails then something is not right.  Don’t try to rationalize it, have a plan.  We’ve had an amazing 6 year bull run. And, as a PATTERN recognition swing trader, the rules state to BUY the first PATTERN that comes along. Well, since August, this is the “cleanest” buy PATTERN to come along.

Also, as readers of this blog you’ll realize that sometimes the patterns are PERFECT and SPOT ON.  At other times, they slip thru some levels but ultimately continue on their way.

Where is the bull thesis wrong?  Right now, those August lows are the key to this puppy continuing on ….

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also, below is the XLP / $SPX ratio … it’s put in a series of higher lows (bullish ratio – bearish equities) and is banging, right now, up to a high-high trend line … WATCH THIS CLOSELY.

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so … the selling that has occurred has been expected to simply finish the pattern. we are getting right into the areas where the patterns are completing.

watch these levels on the $NYA … if were going higher, they should hold. if not, well, hunker down for the time being and we’ll expand our time horizon and look bigger picture.

cheers

B

if you want to know what’s going to happen, read this post.


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update as of 9/26/2015 – so far we have not taken out the high of the pattern on the XLP/S&P ratio.  if we close above the level indicated on a weekly basis, then become very defensive in the coming days/weeks.

 



 

so many people are talking about the FED … who cares, really.  I have no idea how they set rates, no idea of PPI and CPI and no idea about any of the fundamentals.  nope .. I just know patterns and when combined w/ ratio analysis I don’t need anything else.

this is an update of a post that I put out on 8/26/2015

 As people were jumping up and down saying CRASH and saying BUY this pullback I was simply looking at patterns.  This beautiful SELL pattern worked – perfectly. In the ratio analysis – when the chart goes up the Staples are outperforming which means – institutional rotation out of risk and into, well, staples.

here’s the updated chart as of the close today – it hasn’t sold off tons but it certainly hasn’t closed above this level …

so, in the world of ‘if-then’ lets work thru this …

IF the ratio closes (daily) above the SELL PATTERN then the market is going lower, potentially much lower.

IF the PATTERN holds and the ratio stays below the PATTERN level THEN the market isn’t in chaos mode …

it’s that simple, folks.

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if you want, search the site for ratio analysis .. it works and the key is it really gives you a feeling for how the big boys are moving the money around … this move isn’t about “Mom and Pops” folks, it’s about institutional money flow …

we’ve done this before but here it is again:

  • if volatility rises XLP (staples) outperforms the overall market
  • when volatility goes away rotation out of XLP occurs.

today’s move to be expected … a monster SELL of the XLP/SPX ratio occurred.

now, the key will be this level and what happens in around it in the next few days.

B

Main20150826171201

if you want to know what’s going to happen, read this post.


so many people are talking about the FED … who cares, really.  I have no idea how they set rates, no idea of PPI and CPI and no idea about any of the fundamentals.  nope .. I just know patterns and when combined w/ ratio analysis I don’t need anything else.

this is an update of a post that I put out on 8/26/2015

 As people were jumping up and down saying CRASH and saying BUY this pullback I was simply looking at patterns.  This beautiful SELL pattern worked – perfectly. In the ratio analysis – when the chart goes up the Staples are outperforming which means – institutional rotation out of risk and into, well, staples.

here’s the updated chart as of the close today – it hasn’t sold off tons but it certainly hasn’t closed above this level …

so, in the world of ‘if-then’ lets work thru this …

IF the ratio closes (daily) above the SELL PATTERN then the market is going lower, potentially much lower.

IF the PATTERN holds and the ratio stays below the PATTERN level THEN the market isn’t in chaos mode …

it’s that simple, folks.

Page_15-09-16_21-32-45

Page_15-09-16_21-35-18

 



 

if you want, search the site for ratio analysis .. it works and the key is it really gives you a feeling for how the big boys are moving the money around … this move isn’t about “Mom and Pops” folks, it’s about institutional money flow …

we’ve done this before but here it is again:

  • if volatility rises XLP (staples) outperforms the overall market
  • when volatility goes away rotation out of XLP occurs.

today’s move to be expected … a monster SELL of the XLP/SPX ratio occurred.

now, the key will be this level and what happens in around it in the next few days.

B

Main20150826171201

Ratio Analysis …powerful tool

if you want, search the site for ratio analysis .. it works and the key is it really gives you a feeling for how the big boys are moving the money around … this move isn’t about “Mom and Pops” folks, it’s about institutional money flow …

we’ve done this before but here it is again:

  • if volatility rises XLP (staples) outperforms the overall market
  • when volatility goes away rotation out of XLP occurs.

today’s move to be expected … a monster SELL of the XLP/SPX ratio occurred.

now, the key will be this level and what happens in around it in the next few days.

B

Main20150826171201

Part V and “I Can’t Quit You Baby”

this was Part IV a couple months ago:

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

http://www.youtube.com/watch?v=5g5Ypz74jQw

I think this ratio is one of the most important out there as it shows the rotation into the staples of life, so to speak.  additionally, at EVERY major inflection point since 2000 when this ratio bottoms or tops the market does the opposite.  this pattern is complete, it held and I think it will prove to be very bearish for the market.

I can’t quit you XLP/SPX ratio …

November 10 2013 XLP SPX ratio