— Grant Hawkridge (@granthawkridge) July 14, 2020
Today’s Chart of the Day was shared on Twitter by Grant Hawkridge (@granthawkridge). It’s a ratio chart of the Consumer Discretionary sector ($XLY) vs. the Consumer Staples sector ($XLP). This ratio is often used to gauge risk appetite for stocks. Bulls want to see this ratio moving higher, indicating that the offensive sector ($XLY) is outperforming the defensive sector ($XLP). The good news for Bulls is that this ratio is at all-time highs for the first time since late 2018. Grant emphasizes that Bulls need this ratio to continue to hold above the 2018 highs. If it fails to do so, it could spell trouble quickly. But for now, price action in this ratio favors the Bull case for stocks.