the ratio has HUGE support

can’t believe it’s been since mid-april since I posted about the market. at the time, I spied a triangle forming which proved to be wrong and it broke down and the market has continued it’s advance. humbling for sure .. when I was working up the triangle thesis I came up w/ the level that’s shown below but, honestly, I shrugged it off. “it’s not going to go all the way down there, I thought .. ” but I do remember saying, “if it could get down there, then what a perfect spot to short the market.”

folks, we are there … don’t hold me to it BUT I have around 12 reasons that this is HUGE support for the XLP/NYA ratio. don’t need to go back over the importance of this ratio … for a summary when ratio goes up risk is off and when ratio goes down risk is on. UP = bad equities. DOWN = good equities. so support should mean bad equities.

put/call ratio at an extreme, sentiment at an extreme and MONSTER support on the XLP/NYA ratio. probability says support holds and equities top and start back down … all for now. let me know if you have any questions.

disclaimer: this is ALL probability but we now have a very well defined street sign. the market COULD blow right thru the level below and it’s a rocket ship takeoff higher … that is also a probability.

so, play it safe … if it bounces strongly in / around this area then short BUT if it closes on, say a weekly basis, below the defined target area w/ conviction then be long. but for NOW, would wait and see which way she goes. hope this helps.

be safe out there …. Bart

XLP/NYA ratio analysis – an update

06/09/2019 – back to our old favorite. you know I’ve been watching this one for a while. I was hawking a low in the ratio in mid-2018 but missed it from a time perspective … then, in retrospect, easily saw the measured move and the .786 retrace. I’m human, I missed it. should have been more diligent – especially w/ the time cycles coming in from the 2007 low. the TIME had worked as support before so why not now …? Oh well.

now, we can pretty nicely see 5 waves up and we are in the 5th wave up .. could be a 1 or an A. only TIME will tell. I feel reasonably certain that after a pullback on the ratio (less volatility, higher stocks) there will be another 5 wave move higher if this analysis is correct.

I’ve also included an overlay of the NYSE Index and the XLP/NYA ratio to show the thesis that – by using patterns to ratio analysis we can find potential inflection points. in this case – staples (XLP) represent a risk off mindset (volatility/selling) when they outperform the overall market (the ratio goes up). when the overall market (NYSE Index) outperforms (the ratio goes down) then risk is on and the market volatility should go down and prices go up. Seems to work …

so, 5 waves up from the bottom, 3 wave pullback and 5 waves up … that’s what were looking for, right now. TIME will tell.

RATIO ANALYSIS of XLP/NYSE Index – ain’t bearish folks, yet (UPDATE June 3, 2018)

06/03/2018 – quick update to the XLP/NYA ratio.  Still waiting for a BULLISH SRC to signal a ‘institutional shift’ to risk off assets in the form of staples and this ratio finding support (XLP / NYA) and starting to rise. While we did get a BULLISH MONTHLY HAMMER CANDLE in May we still have lower targets so need to keep the ‘bullish mindset’ for now.  Now, that being said, I added an RSI to the picture to get a feel for where we are …

1/ we are at the lowest levels seen since the 2007 financial crisis. yes, that’s true BUT take a closer look and you’ll find the ratio kept going down for 4 more years. 

let’s don’t get complacent but, per my last post w/ the XLK/XLP let’s be aware of BIG TARGETS BEING HIT across the circle of life (bonds, commodities, currencies, GLOBAL equities) to see the pivot.

Eurozone is quite the mess right now … where can they go?  Well, the US stock market doesn’t seem like a bad place now does it?

I’ll keep watching, closely, but this XLP / NYA ratio certainly appears to want to seek out the lower targets so that’s not bearish, for now.

Bart


 

if you’ve been following me for a while, you know I enjoy using advanced pattern recognition to ratio analysis.

for a bunch of XLP/NYSE Index analysis click here: https://bartscharts.com//?s=xlp+%2F+%24nya also here for @seeitmarket: https://www.seeitmarket.com/market-update-consumer-staples-xlp-nyse-composite-ratio-17676/

now, this most recent multi- week stock correction was ‘expected’ based on a zone of support coming in for the ratio. (see above link to read)

that being said, we did rally and now, of late, we have really started to sell off.

this means that institutional ‘mindset’ is showing ‘risk off’ or bullish market momentum.  

this ratio has picked the ‘exact’ weekly/monthly pivots since it’s inception and the tops/bottoms of 2000, 2002, 2007, 2009, etc.

I trust it … it’s falling out of the sky is telling me that, while some selling pressure might still be present, the BIG BOYS haven’t sought cover … (when the crap is hitting the fan they seek staples) so while this ratio  appears to being LIQUIDATED the big boys aren’t ducking and running for cover yet.

THESIS: consolidation/correction to occur or maybe even rally BUT we are going to see the RATIO keep falling, especially if we close below and fly thru the 7 years support zone …

sorry folks, no massive sky is falling or this is it from me … until this ratio finds BIG support and takes off like a rocket I need to remain on the bullish side of the fence … for now.  Just calling it like I see it. Honestly, DID NOT expect such a BIG sell off in the ratio.  But, guess what, that’s what its doing …

let me know if you have any questions …

Bart

PS – note the CYCLE (basic) time rolls into sometimes this month of April. And, we are in April so stand buy …

 

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

this is ‘kind of important’ … I think… and you might want to read to the bottom

everyone is talking about low volatility .. trust me, I hear ya.

but man, do I love me some ratio’s …here’s the deal, put one security over another and guess what. If it’s going HIGHER then the numerator is stronger and if it’s going LOWER the denominator is stronger. BOOM …

so, a couple weeks ago I blogged about my ‘favorite’ ratio finding support .. the XLP/NYA.  It’s a very simple observation … XLP is staples and it’s defensive. the ‘big boys’ shift their focus on staples in time of RISK OFF. yes, i said it .. i know the market will NEVER go down and its always straight up but … well, just take a look

  1.  BLUE LINE is XIV which is an INVERSE of the VIX.  Basically when this puppy goes up volatility goes DOWN and when it goes down volatility goes UP.  NOTE – it’s a rocket ship right now, corresponding to very very low volatility.  that’s the blue line
  2. the candles are my favorite ratio .. the XLP / $NYA.  when the ratio goes UP the XLP is stronger and the thesis is this is defensive rotation by the big boys – aka Goldman Sachs (LOL) and the institutions.
  3. note, I put them on top of each other to show a pretty important correlation
    1. note the blue rectangles.
      1. those represent inflection points in the XIV and the ratio
      2. NOTE: when the XLP / $NYA bottoms, the XIV goes down (volatility increases) and when the XLP/$NYA tops, volatility – as measured by the XIV – goes down the tubes.

So, it’s official:

  • the market is NEVER going down as measured by money managers sentiment index the BULLISH SENTIMENT IS AT A 30 YEAR extreme.
  • the XIV is basically parabolic w/ the ratio having bottomed …

a simple observation can be made – the XIV is about to decline which should to lead to a volatility increase.  now to soon ….

page_17-02-09_19-58-41

also … well, the Nixon Inauguration of 1/20/1973 was about 2300 weeks ago .. current S&P price, take a peak.  the market topped in/around that inauguration.

here’s what the XIV and the S&P look like together …

page_17-02-09_20-16-18

the kind of look the same, don’t they ….?

just typing an observation – the market will  never go down.

make it real – B

heads up the party’s going into the late night … might want to call Uber

12/17/ 2016 – it’s been since June that I’ve posted about the ratio.  for more information see below …bottom line is when the party is raging the “big dudes” bail out of conservative plays (consumer staples) and roll into tech and other more ‘risky’ assets.  If you look at the below – purely from technical terms, we are doing nothing more than returning to the break out resistance (now support – polarity) that held for 13 years. additionally, the rsi is at the ‘usual’ level where it has held as support – every single time since the inception of the XLF ETF.  So, yes the party is raging, but it might be time to move to water or soda or download the uber ride home … this hangover is going to hurt.

page_16-12-07_17-44-22

 

page_16-12-07_17-51-37

 



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

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

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