Risk On/Off Indicator:

One of the traditional ways investors like to gauge the risk factor in a bullish or bearish way is to compare the consumer staples to the consumer discretionary sectors. Below is the ratio chart and it is easy to see how the staples have outperformed over since the start of December. On a YTD basis, the staples via the XLP is basically UNCH, making it the third-best major S&P sector out of 11. The XLY, even with the recent surges in AMZN and TSLA that make up 40% of the fund, is the worst acting major group in 2022 thus far off 11%. Weighing heavily on discretionary are the homebuilders and home improvement plays with the ITB lower 11 of the last 13 weeks and by another 4.6%, this week headed into Thursday. “Energizing” the staples have been tobacco stocks with MO right at 52 week highs (well outshining PM which is 12% off its annual peak). The ratio chart below puts it at a critical juncture as the XLP is retesting the break below the 3-month uptrend. If it fails “risk” will be back on. I am not in that camp but let PRICES dictate your strategy, not your opinions.

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