Consumer Discretionary, Staples Correlation Points to a Bullish Bias

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Consumer Discretionary, Staples Correlation Points to a Bullish Bias

The chart below by J.C. Parets is one I prefer to track. The relative relationship between Consumer Discretionary () and Staples () entered a new dimension in 2017 when prior resistance around 2.0 was blown out of the water.

Now the relationship has entered a head-and-shoulder-like pattern, which suggests a potential ******* of weakness for Discretionary that could translate into weakness for the broader market.

Supporting technicals have emerged from an oversold *******, similar to 2009, that contradicts the bearish setup from the relative relationship.

While stochastics are below 50, the bearish picture is favored, but if it can break above, then a lengthy secular bull rally could emerge.

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The relative performance between the and (for Dow Theory) suggests a ******* of weakness ***** ahead. However, the chart of Transports looks primed for a major breakout.

A breakout of Transports would accelerate the rally in the Dow Jones Industrials and could be very bullish.

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breadth metrics are near overbought but are mostly caught in the middle. There is no real guidance here as to what comes next.

If there is a slight edge, it’s that the Nasdaq Bullish Percent Index ($BPCOMQP) and Nasdaq Summation Index ($NASI) are near overbought (so favoring a top), but it could be months – if not years – before they reach historic peaks.data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==

These metrics help track the ******* picture for the indices. Price action is king, and price suggests a broader rally is favored, but if we see price drift lower, particularly if the sheds its breakout, then it could be a troublesome rest of the year.

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#Consumer #Discretionary #Staples #Correlation #Points #Bullish #Bias

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