Staples Turn?

Often investors will look to “risk on” indicators to assess sentiment. One used is the ratio chart below comparing consumer discretionary to the consumer staples, via the XLY and XLP. If the former is outperforming that suggests risk on as consumers snap up more than just the bare necessities. So far in 2023, the XLY is the clear leader as seen below, but like technology is this relationship in need of a breather? The XLY is up nearly 30% YTD with the XLP just above the UNCH mark nearly halfway in. This week the XLY ended a 6-week win streak but is higher 12 of the last 15, and 2 of the decliners fell less than 1%. In contrast, the XLP has dropped 6 of the last 8 weeks. Looking at the top 10 holdings in the XLP from a technical perspective only COST and WMT look attractive. Costco now sports a cup with handle pivot of 531.36 and Walmart is just above a short cup base breakout trigger of 154.39 although the bearish engulfing candle so soon after on 6/16 looms large.

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