Confidence Ratio Going Down

A great indicator to determine the confidence (ie. risk appetite) of investors/speculators is the XLY/XLP ratio. XLY is the ETF for consumer discretionary stocks whereas XLP is the ETF for constumer staples stocks. In times of confidence, XLY should perform better than XLP because there is belief that the economy is doing well and that people will spend cash on things that are not absolutely necessary.

The ratio has been tracking US equities indexes fairly well over the last years, but now we see major divergence. XLY/XLP is moving down and from a technical analysis standpoint it does not look like it is about to go rise back anytime soon.

Yet, at the same time, the S&P 500 has been hitting all-time highs. This performance seems like it is not supported by risk appetite - which it should!

So what should you do from here? Short this ratio? Short the S&P? That is all up to you. This is just another factor from a long list that supports the thesis that equities are overextended.

Good luck trading.

Related Ideas

EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 简体中文
ZH 繁體中文
AR العربية
HE עברית
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features House Rules Moderators Website & Broker Solutions Widgets Stock Charting Library Feature Request Blog & News FAQ Help & Wiki Twitter
Profile Profile Settings Account and Billing My Support Tickets Contact Support Ideas Published Followers Following Private Messages Chat Sign Out