XLP - Consumer Staples are up 40% from their covid low, SPY is up over 90% since April 2020.
A bottom in XLP/SPY has always signaled a larger degree market correction. Investors rush into XLP as a flight to safety.
The ratio XLP/SPY looks like its chugging down still and have followed in the weakness of defensive stocks these past weeks.
WAKE ME UP WHEN XLP...
1. EMA's crossing down?
2.Price near support and is oversold.
3. If price breaks through bottom oval we could see a true retracement to support.
4. I price breaks through top oval, we could see a retracement to the upside.
This morning, the UMCSI printed a 70.2, which is the worst number since March of last year and, prior to that, the end of 2011. If you were wondering why TLT is up 1.4% today, and XLP is crushing, while XLY and XLF are getting hurt, it's because a slowdown in consumer sentiment is REALLY bad for inflation expectations and retail spending. This further plays into...
The Discretionary vs Staples ratio (captured via the $XLY and $XLP etf's) serves as one of many proxies for a potential "Risk Off" signal. While it had been "Risk On" for a number of months, the evidence is mounting that the trend has reversed and market participants are now moving towards more defense and less offense. Be cautious of a sudden and crowded rush...
Discretionary vs. Staples = Economy Bullish / Economy Bearish
Ratio rising = Discretionary > Staples
Ratio falling = Discretionary < Staples
Often a leading indicator of the 10yr yield (TNX)
Will continue to track this potential new signal.
I have this quotient in my watchlist to monitor the risk appetite of the market. The AMEX:XLY ETF (Consumer Discretionary) is a good indicator of high risk appetite because its holdings are more focus on growth therefore are more volatile. And the AMEX:XLP ETF (Consumer Staples) is more focus in value stocks, therefore less volatile.
AMEX:XLY with holdings...
Here's another ratio pair I like to watch. Its SPDR Consumer Staples ETF vs SPX. This chart will rise when XLP out performs the SPX on a relative basis. As you can see the XLP/SPX has just come into a key support zone. If XLP/SPX breaks this support it's very bullish. However, if it bounces like is has in the past expect a sell off in stocks.
Note.. the lower...
Until I get confirmation with price I have to maintain a bullish bias. Price of the major indexes continue to hold the highs
in the midst of uncertainty and a slew of bad news and the defensive sectors (XLU/XLP) remain weak signaling a
continued appetite for the riskier assets.
🛒 Consumer staples is dealing with a remarkable situation on the macro front which we have discussed at earlier opportunities (see ALPHA PROTOCOL: SEEKING IMMEDIATE EXTRACTION).
One should be wary of the immediate risk for a waterfall as consumer staples hang onto...