Did you see Consumer Staples go out at new multi-year relative highs yesterday? The strength is in Staples, not in Banks or Industrials, for example, which keep making new relative lows.
So why should we care?
“JC, no one cares about staples, why does this matter?”
Well, as it turns out, Consumer Staples relative strength is one of the most reliable indicators of market strength and weakness that exists. You see, when stocks are doing well, Consumer Staples tend to underperform the rest of the market. When stocks are doing poorly, Staples are the leaders.
Think about it. No matter how bad the economy gets, we’re still going to brush our teeth, wash our dishes, smoke cigarettes and drink beer right? As a society, I mean. Well, those are consumer staples. This is the group of stocks that outperforms as stocks fall, which makes perfect sense.
Here is the chart of Staples breaking out to new multi-year highs relative to S&Ps: [Read more…]