Key Takeaway: Staples/Discretionary ratio at cycle lows. A bullish reversal may be indicative of potential weakness in broader equity markets.
Expanded Commentary: The analysis considers the chart of equally-weighted consumer staples ETF (RSPS) relative to equally-weighted consumer discretionary ETF (RSPD) over several years, starting November 2006. The lower panel highlights the 7-month RSI where the current regime sits within the OVERSOLD category with a reading of 19. Historically, this range has coincided with lows in the ratio (near the start of a reversal) or has seen consumer staples slow it's aggressive downward trend versus consumer discretionary.
Lester Davids
Analyst: Unum Capital
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