Technical Observations for the $XLE/$SPY Ratio

Among the evidence that gives me some conviction that the inflation trade is ending is this chart. I will point out several of its features.

  1. The inverse measured move has been met. It’s greedy to simply expect more without another structure to support it.
  2. The advance from the late 2020 low to the early 2021 high is a clear 3-wave pattern ( the blue “a”).
  3. And from blue “b”, “c” should be an impulse, and it is, as there are 5, non-overlapping waves in that move (the orange count).
  4. The relationship between the length of “c” and “a” is extreme, at 2:1. This would be a terrific place for it to turn.
  5. The bearish divergence on the RSI is what we would expect to see between the high of a “3” and a “5.” in this case those internal to “c.” This suggests the move is more likely to end soon rather than continue.

All of these technicals support a reversion, or even at a minimum, a consolidation or pullback of some kind if not a complete trend reversal.

XLE/SPY


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


The Inflation Trade Is Dead and the Fed Put Isn’t

In September of last year, during the correction we were having, I wrote an article titled “The Reflation Trade Isn’t Dead and Evergrande Isn’t Lehman.” I took a lot of flack for that, and yet, the S&P 500 went on to rally almost 9% further, and oil—a major point of discussion in my article—went on to rally almost 90% further. And furthermore, Evergrande’s demise has had no discernible impact on the global financial system.

I turned out to be right.

Now the talk is that inflation is going to destroy us all, so let me tell you why I do not think that is true.

As with the previous article, I want to involve energy. In the other article, I showed how oil was developing some very bullish structure. Presently, I now believe energy is in a very bearish configuration. That will not serve the “inflation will destroy us all” narrative. For this discussion, I will use $XLE.

Last summer, I came to interpret the large sideways structure as an expanding triangle “B-wave,” the central structure of a larger, 3-wave corrective pattern (the pink A-B-C you see below). I expected us to rally in the final leg of that structure, the big pink “C-Wave,” and we did.

XLE

Read more “The Inflation Trade Is Dead and the Fed Put Isn’t”


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


$XLE May Pull Back Soon

After hitting my last target noted here, I think $XLE may be ready for a correction soon, taking us as low as the orange box below in at least three waves.

XLE

Read more “$XLE May Pull Back Soon”


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


$XLE Bullish Consolidation Breakout and Target

The little green bull flag’s measured move on $XLE is noted by the orange box above us:

XLE

Read more “$XLE Bullish Consolidation Breakout and Target”


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


The Big Bull Count for $XLE and Target

Commodities have been in a very long bear market, and those don’t last forever. If negative oil wasn’t a sign of a generational low, then I don’t know what else could be.

As with $OIL, $XLE has broken a multi-year down trend and seems to have tested it with support. This is a very bullish count (orange 1-2, green 1-2) but if it were a 1-2-3-4, then we would only expect nominal new highs followed by a relapse under the trend line.

That would be quite the fakeout, to break trend like that only to give it right back up (to the delight every deflationist out there) but I prefer trying to listen to it here. We may very well be entering a commodities bull market here, and it’s something that could last for many years. And it would start with a 1-2-1-2 pump breaking trend.

Here is the target for minor 3:

XLE


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.