relative strength of staples vs the S&P importance
in order to get up to speed, if you have not been following, please see the following post:
we completed a perfect price/time pattern BUY on the ratio and it did, in fact, respect the pattern level. HOWEVER, since then we have taken out the lows of that pattern and if we go back you’ll see that the .786 was ‘still a target.’ the importance of this ratio cannot be overstated – at every major inflection point since 2000 (I don’t have data that goes back any farther) it has pointed to all of the tops and bottoms of the market. perhaps we’ll go down and tag the .786 … what I can say, is if we blow thru the .786 then it will show a lack of institutional fear in this market as the thesis is the staples start to out perform as rotation occurs in a volatile or bearish market. so far, this ratio has been stagnant and correcting for a very long time … let’s stay tuned and see what a little lower does for our ratio.
additionally, I have included the WMT gauge. please see these posts to get a feel for the importance of this ratio: