Highest ratio for consumer discretionary to staples since July 2019 on today's close. Some divergences persist across the broader market like RSI and % of companies above 50dma in $SPX, but some are working towards resolution like NYSE common-stock online AD line. Price is king. pic.twitter.com/RPQVsvEcYG
— Michael McKerr (@MikeMcKerr_TDA) February 12, 2020
Today’s Chart of the Day was shared in an article by Michael McKerr (@MikeMcKerr_TDA). It’s a chart of the S&P 500 over the past couple of years. The ratio chart in green shows the Consumer Discretionary sector relative to Consumer Staples. This ratio is often used to gauge risk-appetite, and right now, it’s confirming the new highs in the S&P 500. Michael points out that there are several bearish divergences forming, such as RSI and the percent of stocks above their 50-day moving averages. However, these divergences can persist for a while, and some are working towards resolving themselves higher. It’s important not to get too bearish at first sight of these divergences. Instead, it’s better to wait for price to confirm the divergences by exhibiting weakness. While these developments warrant some caution, the S&P 500 is currently at an all-time high, and price is suggesting that it’s still too early to get aggressively bearish.