Its The Little Things:

A good gauge to determine the risk appetite of the consumer is to compare the defensive staples sector to the consumer discretionary (it is also a good way to see the probability of yield curve inversion). Below is the ratio chart comparing the XLP to the XLY and the last 6 weeks show one would be profitable with an overweight of the former. This is a cautious sign and on the simple PRICE charts below the ratio chart, one can see ever so slight difference as of late with the XLP turning higher in October as the XLY declined. This will obviously be heavily impacted by the action in the 2 largest XLY components in TSLA and AMZN (the duo makes up more than 40% of the ETF). The former REPORTED earnings after the CLOSE Wednesday and not surprisingly benefitted from round number theory with a lukewarm bounce off the very round 200 number. AMZN REPORTS earnings next Thursday after the CLOSE and Bezos may have given some insight into it by tweeting Tuesday that one “should batten down the hatches.” Perhaps that cup with handle on the ratio chart below in the XLP’s favor is echoing the statement too.

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