Staples In The Portfolio Diet:
“Risk off” has been making its presence felt short term. Will it last awhile? No one knows for sure, but PRICE action is certainly making a statement to be careful. There is no reason to try and be a hero here, as the market has made a substantial move in recent years, and some healthy digestion could be a good thing going forward. We wrote about “risk off” in healthcare yesterday, and today we try and convey how it looks in the consumer space. The most traditional way to look at that relationship within consumer is to look at the staples versus discretionary. For the first time in 6 months, the former is looking better than the latter. Breakouts are failing pretty quickly, and that is a red flag. Perhaps that is best exemplified with DKNG, which rocketed above a bullish ascending triangle on Monday, and has since acted very weakly. It is about 15% off intraweek highs. The ratio chart below is working in the staples favor, even with top components looking mortally wounded including PG WMT and COST. Many investors are going to be happy after Fridays CLOSE for some thinking after this weeks action. They may conclude it is time to exit, making the drawdown from this week accelerate.