Defensive Sectors outperformingThe use of Equal Weight ETFs such as Consumer Discretionary (RCD) relative to Consumer Staples (RHS) can yield meaningful clues about the underpinnings of the stock market. Presently, this RCD/RHS relative strength ratio is below the levels seen in the Q4 2018 corrective period (red line in graph). This measure, along with other signals such as an elevated VIX, supports those arguing that we are in a "Risk Off" or "defensive" equity environment. Until the relationship breaks out of this zone, investors are well served to manage risk and stay nimble.
RCD
Risk Gauge Reaches ResistanceConsumer Discretionary vs. Consumer Staples remains in "risk off" mode.
Online RetailCOVID-19 resulted in Online Retail ETFs reaching new all-time highs on a relative & absolute basis.
Online Retail/SPY has been known to move similarly to CD/CS.
We've seen CD/CS break diagonal resistance, but remains below its June 2018 ATH.
EW CD/ EW CS is still heavily lagging and well below its June 2018 high
Risk offEW Discretionary vs. EW Staples reaches a new low. Indicating an increased risk off environment in stocks
