Consumer Discretionary:Staples Ratio Confirms Correction

Here are some more data confirming a stock market correction.

The consumer staples ETF (XLP) began to outperform the consumer discretionary ETF (XLY) on January 25th while the S&P500 continued to move higher.   As the ratio (red time series) moves lower it generally reflects growing caution among investors, who moving into defensive plays, and has been a fairly good early warning indicator of risk aversion.

We’ve also included a chart with a longer time period.  Note how the ratio led the S&P500 (SPY) during collapse and was first to bottom.

Nobody knows how far stocks will pullback or, for that matter, if the pullback is already over.  We try to see through the fog with as many instruments as possible and this is just one.   Not perfect, not always reliable, and the timing makes it difficult to trade, but it does help in formulating a trading view.

Click charts to enlarge.

Feb21_Consumer Discretionary_Staples_SPYFeb21_Consumer Discretionary_Staples_SPY_2(click here if chart is not observable)

This entry was posted in Sector ETF Peformance and tagged , , , , . Bookmark the permalink.

1 Response to Consumer Discretionary:Staples Ratio Confirms Correction

  1. richardbenson2110 says:

    In 2009, which is the last year that the BLS has release comprehensive stats when Americans spent $1.13 trillion on goods purchases each season. It is estimated to have been $1.77 trillion in Summer 2013.

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