This Ratio Might Be Sending A Warning Sign To Stocks (XLP)

Technical analyst Chris Kimble looks at an important consumer stocks ratio and sees potential for a major reversal.

The Discretionary/Staples ratio has been in a solid uptrend over the past 8-years, inside of rising channel (A), which sends a bullish message to the stock market. It has been especially strong in the past 2-years.

These rallies now have the XLY/XLP ratio at the top of rising channel (A), where a couple of weekly reversal patterns took place at (2). The price action over the past few weeks has NOT changed the overall trend-

Joe Friday Just The Fact Ma’am: If steep rising support breaks at (2), it would send a cautionary signal to stocks as momentum is at the highest levels since 1999!

The Consumer Staples Select Sect. SPDR ETF (XLP) closed at $52.22 on Friday, up $0.16 (+0.31%). Year-to-date, XLP has declined -7.69%, versus a 3.62% rise in the benchmark S&P 500 index during the same period.

XLP currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #19 of 41 ETFs in the Consumer-Focused ETFs category.

This article is brought to you courtesy of Kimble Charting Solutions.