Tag: $XLP

XLP / $NYA … approaching .382 from all time low

if the XLP/NYA ratio finds support and appears to end an A-B-C correction THEN we ‘should’ see Volatility Spike and correspondingly a nice correction in equities. If this level fails, then we might see some consolidation or a little pullback but nothing that could spook the masses.

it might be noted that … right now we are levels of bullishness as measured by market vane that we haven’t seen since ..yes, you got it the 2007 top.

a plunging liquidating sell-off should, ultimately be bought .. as I still don’t think this run is over but I do believe we are long overdue for a nice pullback.  W/ the options expiration and most mutual funds legally bound NOT to sell and be invested at all times I don’t think we’ll see anything till next week, if at all.

Note the chart below ..

  • XLP/NYA – candles
  • XIV (inverse VIX) blue line
  • NOTE: a most inflections of the XIV (up or down) the ratio either led or gave a heads up that volatility would increase or decrease.
  • Our thesis is the ratio ‘should’ find support on the .382 from the all time low in 2007 and correspondingly cause an uptick in volatility and a market sell off.
  • A CLOSE (WEEKLY) BENEATH THE .382 WILL TARGET A LOWER MEASURED MOVE TARGET. IF THIS HAPPENS EXPECT SOME CONSOLIDATION OR MINOR FITS AND STARTS BUT NOTHING TO KNOCK YOUR SOCKS OFF. WOULD WAIT TO SEE WHAT HAPPENS A LITTLE LOWER IN THE RATIO.

 

XLP / $NYA – wow, what a “perfect” sell pattern on the ratio – means BUY equities (if it fails, watch out) UPDATE

09/17/2016 – as you can see below, this SELL the ratio (BUY THE NYA Index) worked very nicely.  Again, for those of you new to my blog the concept is this:

  • Me or You individually don’t do a darn thing to move the market.  It’s the INSTITUTIONS that make the market.  When they get ‘risk adverse’ they move into ‘stuff’ we need to live .. aka Staples (XLP)
  • Using ratio analysis – in this case XLP (ETF) / NYSE Index (the largest index out there) we can see what ‘they’ (the collective they) are thinking …
    • IF the ratio is going UP then XLP (Staples) are stronger than the overall market … read: the institutions are moving into ‘conservative names’ and are “risk adverse.’
    • IF the ratio is going DOWN then XLP (Staples) are weaker than the overall  market…read: the institutions are moving out of ‘conservative names’ and are ‘risk on.’
    • Using PATTERNS we can ‘see’ potential inflection points for the ratio and make investments accordingly.

In the charts below we can see:

  • POLARITY – during the 2007-2009 drop, you can see that the ratio EXPLODED higher and promptly ran into major resistance. This level held for years but was finally broken thru  in/around 2015-2016.
    • The polarity principle is former R becomes Support (and vice versa) so the red arrows turn into green arrows (representing Support)
    • Based on the current length and (my opinion) an overextended market the probability of this ratio stopping at the blue highlighted region is more (again my opinion) than the ratio slicing thru this area.
      • IF it does THEN the lower level (highlighted orange) is the next logical stop.
  • ‘Basic’ Trend line channel … note we are approaching the lower portion of it
  • Multiple retracement levels – the .382 from the all time low of 2008 is key
  • An RSI finding monthly support which began every move UP in the ratio.
    • note the second chart below and what this did to the NYSE Index.
  • We have measured moves (solid and dashed blue arrows) showing the ‘largest’ corrective move in the ratio since inception
    • Note: the dashed blue line is using the “close” and not the wicks that tried to get thru this key level on the ratio

One last chart … note, IF the ratio is BULLISH then we have (again all probability) been carving out an Elliott Wave A-B-C correction labeled below.

  • w/ this type of correction the ‘C’ wave is sometimes 1.618*’A’ which you can see nicely hits where 1=5 of the C wave.  So, shown below in the light blue shaded area are potential zones for the reversal.

So, monitor this ratio for a weekly signal reversal candle (bullish) and this should market a correction .. .I’m not calling for a crash or a bear market or any of that … it’s about ‘time’ for a nice thump.  How deep it goes…? No idea but I’ll certainly be watching this ratio to give me a heads up on where to buy.

Here’s the DAILY ratio w/ NYSE Index overlaid on top of the ratio … note the ‘SELL RATIO’ and ‘BUY EQUITIES’ …this ratio works.

Here’ the MONTHLY NYSE Index:

I did a .786 AB-CD projection from the all time low in 1974 and that hit the 1.27 extension (monthly) – where we are right now.  Also, take note of the blue arrows … doing a count where 1=5 we get to 12,500 ish. So, again, would expect some sort of resistance to be forming – albeit soon.

one last … folks 2 weeks till quarter end. I hate to add opinion here but do you really think THEY (the big guys/gals) are really going to sell this market as we approach an AWESOME quarter end? Ummmmm, not I.  So, the real shenanigans should start the first week of October, if at all …

hope you have had and are having a good weekend.

Bart

 

______________________________________________________________________________________________

here’s the power of this ratio:

DANGER WILL ROBINSON … if/when the patterns fail (and they do) the market breathes in the direction of the failure. Note, we have some VERY strong thrust into the pattern level and this “usually” means the pattern will fail BUT you never know do you? So now for the best part of the pattern recognition world the “if-then”.

IF the pattern works, equities should bottom for a nice BUY (swing trade – not long term for now … )

IF the pattern fails, equities will continuing selling off and we should look for the NEXT pattern to play … make sense?

Here’s the “perfect” sell pattern:

Page_16-06-27_22-40-40

if your a bull polarity fails …if your a bear it works and the ratio goes up

that is all.

Page_16-03-14_09-53-19

my favorite ratio is still warning to stay defensive, for now ….

1/30/2016 – the market has rallied nicely off the most recent lows.  HOWEVER, I’m getting into “correction over” or “bull trend resumes” until this target shown below (updated) is hit and then we get a weekly signal reversal candle.  Take note – when the overall market is going UP this ratio should be going down. It isn’t … in my world, that means staples are still the play and that’s defensive.  Stay tuned …

Page_16-01-30_09-20-27

“defy human nature and do the work …”

Jim Twentyman

folks, the market is giving us a road map and, if we get our “heads out of the airplane” you can see it …

what’s the “best” road map, in my HUMBLED opinion?  Ratio analysis using pattern recognition …the key w/ ratio analysis is it gives you the “big boys” road map.

XLP – staples. in times of “risk off” the institutions have to go somewhere, right?  they go defensive – staples.

$NYA – a really really important index.

so, when the XLP starts to outperform on a relative basis, then the gig is up and the rotation is occurring.

here’s a more in depth blog about it: http://bartscharts.com/2015/06/27/revisiting-the-xlpspx-ratio-again-in-june-2015/

here’s the ratio, updated:

Page_16-01-22_06-14-18

couple things:

  • note the pattern a little higher (means more losses for stocks, OBTW).  That’s a really really powerful SELL pattern which means Equities go up.
  • note the pattern timed – almost exactly – EVERY high and low since 2000. I would suspect it would give us clues for longer periods BUT XLP inception was in 1998.
  • note, at “market lows” there was a shit load of accumulation occurring or, in the case of the chart “distribution” at the highs.
  • one last, as the market continued to breathe into the stratosphere one would think that the RATIO should have been falling out of the sky right? I mean it was so easy, so good BUT the market was telling you – right here on this chart that we were weak internally AND the big boys weren’t really playing were they?  If they were full risk on then this ratio would be going down like it did 2002-2007.  It didn’t .. in fact NOT ONE SWING LOW HAS BEEN BROKEN since 2007 ratio low.  Think about that for a moment …

So, unless your a swing trader w/ a couple days holding period OR a day trader then I wouldn’t touch equities until this pattern completes.

hope this helps.

B

turn off the talking TV pundits, the endless Twitter feeds and defy human nature …

“defy human nature and do the work …”

Jim Twentyman

folks, the market is giving us a road map and, if we get our “heads out of the airplane” you can see it …

what’s the “best” road map, in my HUMBLED opinion?  Ratio analysis using pattern recognition …the key w/ ratio analysis is it gives you the “big boys” road map.

XLP – staples. in times of “risk off” the institutions have to go somewhere, right?  they go defensive – staples.

$NYA – a really really important index.

so, when the XLP starts to outperform on a relative basis, then the gig is up and the rotation is occurring.

here’s a more in depth blog about it: http://bartscharts.com/2015/06/27/revisiting-the-xlpspx-ratio-again-in-june-2015/

here’s the ratio, updated:

Page_16-01-22_06-14-18

couple things:

  • note the pattern a little higher (means more losses for stocks, OBTW).  That’s a really really powerful SELL pattern which means Equities go up.
  • note the pattern timed – almost exactly – EVERY high and low since 2000. I would suspect it would give us clues for longer periods BUT XLP inception was in 1998.
  • note, at “market lows” there was a shit load of accumulation occurring or, in the case of the chart “distribution” at the highs.
  • one last, as the market continued to breathe into the stratosphere one would think that the RATIO should have been falling out of the sky right? I mean it was so easy, so good BUT the market was telling you – right here on this chart that we were weak internally AND the big boys weren’t really playing were they?  If they were full risk on then this ratio would be going down like it did 2002-2007.  It didn’t .. in fact NOT ONE SWING LOW HAS BEEN BROKEN since 2007 ratio low.  Think about that for a moment …

So, unless your a swing trader w/ a couple days holding period OR a day trader then I wouldn’t touch equities until this pattern completes.

hope this helps.

B

PATTERN repeat, watch for them at tops and bottoms

I’ve blogged a bunch about the power of using technical analysis and ratio analysis.  you don’t have to read a 500 page diatribe about the fundamentals (which are important) but you plot A/B and see if it’s going UP or DOWN. UP A is outperforming .. DOWN and A is underperforming. DONE.

so as everyone gets their panties in a knot about the Death Cross (I like to call it the Iron Lotus – actually got a “like” from Blades of Glory on Twitter – how cool is that?), China and the Yuan and a low VIX and let’s see what else … blah f’ing blah.  I go to the chart. What is it telling us?

John Murphy – technician extraordinaire – taught us in the CMT program to look for discretionary and staples to give us clues.  How do you find clues? do the ratio….

Here it is …

XLY / XLP
XLY / XLP

what sticks out to me …? we have the SAME PATTERN at the top … but it also took time to finally crack. to the tune of 2-3 years….

I’ve drawn some simple trend lines to watch and if/when they are taken out on a weekly close below then it’s time to look for Will Ferrell’s head on the ice because the Iron Lotus failed (meaning the sharp skate cut his head off … tragic)  Take a look at the “get out” portion of the trend line from 2007 time frame.  We can see it got tested and then it broke … time to get defensive.  Believe that’s a good playbook for now …until tested and broken the band “should” play on ….

here’s the $NYA overlaid .. note the distribution that occurred at the 2007 top.

XLY / XLP ratio and $NYA
XLY / XLP ratio and $NYA

here’s the XLY/XLP ratio w/ the $NYA/XLP overlaid on top of it … why is it important?  Well, as you can see, much like the last post: http://bartscharts.com/2015/08/08/bill-and-teds-excellent-adventure-meets-the-matrix-in-two-charts/ we can see that the ratio of the NYA/staples is plumbing all time lows … this is not a very good picture.

so, if the rotation really occurs out of the discretionary’s, believe this ratio will break support and start downhill fast.

so, now we have some trend lines to watch for weakness.

it’s all one big jigsaw puzzle.

Main20150813085159

rock on, ok?

B

Bill and Ted’s Excellent Adventure Meets the Matrix in two charts …

folks, work w/ me …

  • ratio analysis: A/B ….if A stronger (relative strength) then chart goes up. if B stronger (relative strength) then ratio goes down.
  • $NYA – New York Stock Exchange Index – largest  barometer of stock market health
  • XLP – institutional rotation occurs into staples in a “risk off” world .. people need “staples” to live so they should outperform and have more relative strength …

here’s my “if-then” logic …

IF $NYA is good to go and healthy THEN a ratio of $NYA/XLP will go UP and IF the ratio of $NYA/XLP is going down then something ain’t right at the circle K ….

something aint right at the circle k
something aint right at the circle k
$NYA / XLP
$NYA / XLP

Note: at these levels (in the past) the $NYA has always started to outperform (the ratio goes UP).

Now, take a look at this chart w/ the $NYA overlaid on top of the ratio ….

note the massive DIVERGENCE - the ratio should track the $NYA UP into new highs ... instead it's plumbing new lows. IT WILL RESOLVE
note the massive DIVERGENCE – the ratio should track the $NYA UP into new highs … instead it’s plumbing new lows. IT WILL RESOLVE

so, if you’ve read this far, then your a SPECULATOR and you like to play.  One thing that I’m fairly certain .. this discrepancy in the ratio and the $NYA will resolve.  Two outcomes …

  • w/ $NYA at new highs, the ratio will find support as it did in 2001-2002 and 2008 and start back up and the $NYA will take off and move higher and higher and higher …
  • w/ $NYA at new highs the ratio will crack thru this decades old support (showing institutional rotation into staples) and cause a rather big move to the downside and, perhaps, much larger correction than anyone is expecting.

YOU CHOOSE:

Blue - $NYA keeps going higher and higher ... Red - $NYA cracks, ratio accelerates to new lows and ... you do the math. PICK!
Blue – $NYA keeps going higher and higher …
Red – $NYA cracks, ratio accelerates to new lows and … you do the math.
PICK!

rock on, ok?

B

revisiting the XLP/SPX ratio … AGAIN in June 2015

time for another update … take note, HIGHER LOWS in the ratio and it bounced off the .786 retracement w/ a nice MONTHLY hammer.  It sure appears this ratio is about to go up, which should put pressure on the stock market to move higher.

this has taken a LONG time to itself out ….

potential count for the ratio - note the higher bottoms since 2009.
potential count for the ratio – note the higher bottoms since 2009.

 

inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX
inflection points in the ratio correspond to movements i the VIX. NOTE THE HIGHER BOTTOMS IN THE VIX

one last, below, showing the importance of this ratio and the monstrous divergence present.

  • w/ the Equity market soaring to new highs the RATIO should have been falling like a stone.  IT HAS NOT….again, in fact, it has made higher lows. This is a very important sector rotation development that needs to be paid attention to closely.  It WILL resolve itself.
EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio....
EVERY HIGH and LOW in the equity market has corresponded to an inflection in the ratio….

 

folks, bringing this up, again, because this divergence is MONSTROUS.

in order to show the divergence and how something is “not quite right in toon town” I’ve actually inverted the ratio to show the S&P 500 on top this time.  t

the only reason is it shows the amazing divergence present .. when you look at the chart below notice the perfect synchronicity between the S&P500 and the S&P500/XLP.  but notice around 2011, the dance breaks up … that’s a big deal to me and while it’s true you obviously can’t fight the fed and it’s different this time what I believe it tells us is the “smart money” has stayed in staples or haven’t jumped into this amazing bull market as much as anyone thinks.

notice the divergence!
notice the divergence!

now, here’s the same ratio but this time we have the STAPLES has the numerator … note, when this ratio BOTTOMS the S&P 500 TOPS and when this ratio TOPS the S&P 500 bottoms.  EXACTLY … the theory is the institutions move in/out of “defensive” names during times of volatility so we expect the relative strength of the XLP’s to increase during bear markets / sell-offs (the ratio goes up) and decrease during bull markets/rallies (the ratio goes down)

the ratio HAS NOT GONE DOWN during the past 2 year rally phase … tells me the institutions have kept their powder dry.

XLP / SPX - note divergence and NO NEW LOWS on the ration ....
XLP / SPX – note divergence and NO NEW LOWS on the ration ….

just a matter of TIME …

here’s how powerful the XLP/SPX ratio is …

below are a couple intraday charts of the “ratio” of XLP/SPX.

note, ALL the major inflections (even intraday) are equal/opposite the overall market.

so, where does that leave us?  Well, you can see a minor buy pattern (two blue triangles) but I favor lower where the .618/.786 overlap.  If/when this ratio hits that level I would be a seller of the SPX.

Main20141023214158 Main20141023214555

ratio’s are really powerful

been blogging a BUNCH about the importance of the XLP / SPY ratio.  Why?  Well, EVERY turn since 2000 has been nearly exact to the ratio turning up or turning down.  here’s the chart:

XLP / SPY ratio w/ S&P overlaid on top of it ... NOTE divergence since 2012
XLP / SPY ratio w/ S&P overlaid on top of it … NOTE divergence since 2012

folks, it doesn’t get much better than that … the CANDLES is the ratio of XLP / SPY.  The BLUE LINE is the S&P 500.  the chart time frame is monthly.  EVERY PIVOT IN THE STOCK MARKET HAS BEEN A CORRESPONDING PIVOT EQUAL/OPPOSITE in the ratio. (move up in stocks equals move down in ratio and vice versa)

why is this important … well, check out the VIX and the ratio

XLP / SK&P w/ VIX overlaid on top of it
XLP / SK&P w/ VIX overlaid on top of it

here’s the deal — RATIO ANALYSIS is a unique look into the key hole of the INSTITUTIONAL rotation … and, my take is the ratio should have been sreamcing down while the S&P ripped to new highs.  IT DID NOT … that has been something I have tried to resolve for almost two years …

now, why is this low so important in the ratio?  well, take a peak at the RSI BULLISH support zone below:

XLP/SPY ratio found support on bullish RSI zone
XLP/SPY ratio found support on bullish RSI zone

and, then you could have this as your count …

a POTENTIAL count for the XLP / S&P which shows higher
a POTENTIAL count for the XLP / S&P which shows higher

so, let’s review:

  • the CHARTS show
    • when the XLP/S&P 500 ratio pivots so does the market …
    • we had a very noticeable divergence in the ratio and the S&P 500 as the S&P 500 screamed to new highs
    • we have shown that the VIX pivots w/ the ratio
    • we have shown the ratio is at bullish RSI support zone …

all the above tells me 1) volatility is here to stay, 2) expect pressure on the equities and 3) I could and might be completely wrong and that’s OK!

make it a great weekend and rock on, ok?

Bart