A Mid-Cap Trend Worth Watching

JC Parets
February 6, 2020

From the desk of Tom Bruni @BruniCharting

Thank you to everyone who responded to this week's mystery chart.

Most respondents were waiting for more information before getting long or short but did agree that the trend had shifted to sideways.

With that as our backdrop, let's take a look at this week's chart.

The chart in question is the Mid-Cap Consumer Discretionary/Mid-Cap 400 ratio which has shifted to a sideways trend after falling for 3.5 years. The Mid and Small-Cap Consumer Discretionary sectors have struggled over the last few years to gain any traction on a relative basis and this is more evidence of that.

Click on chart to enlarge view.

This week's action reconfirms the mess that is this trend (or lack thereof), but I've got an alert above 2.20 to let us know if and when this bearish to bullish reversal does confirm. For now though, a neutral approach seems best...particularly as Large-Cap Consumer Discretionary also loses its footing relative to the S&P 500.

This week's reveal was a little lackluster, so here's a bonus chart showing Small-Cap vs Large-Cap Healthcare stocks continuing to build out a base and attempting to break out. This one is much more constructive and worth watching in the days and weeks ahead.

Paying attention to these ratios is a good way to get a high-level understanding of the major trends in the market. These are trends we're indirectly following as market participants, noticing as we go chart by chart and stock by stock, but tracking the ratios can be a good starting point if you don't have time to review the S&P 1500 or Russell 3000 regularly.

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Thanks for reading and please let us know if you have any questions!

Allstarcharts Team

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