Monday 16 December 2024 (Time: 09h20)
If 'market memory' is a concept you identify with, then the chart below might be of interest to you. The chart has been prepared in the following manner:
Upper Panel = S&P 500 Index
Lower Panel = Consumer Staples Relative To Consumer Discretionary
In the lower panel, which is Consumer Staples Relative To Consumer Discretionary, the ratio is approaching a multi-year swing low which may be an area of significance in which market participants rotate into the consumer staples sector and out of the consumer discretionary sector. This would mean greater demand for stocks which do well in a slowing economic environment (consumer staples).
The arrows on the chart (near the vertical yellow line) show that the S&P 500 Index experiences a period of weakness when consumer discretionary stock underperform. This is also denoted by the two square blocks shown on the chart.
While I am not making a prediction, recognizing the potential for price action probability an help traders remain open to the potential for a given market scenario.
Here, the ratio in the lower panel could overshoot to the downside, followed by a bullish reversal. This would mean that consumers could start to outperform consumer discretionary stocks, which would be a negative factor for the S&P 500 Index.
Lester Davids
Analyst: Unum Capital
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