• 15 hours What Is Africa’s Role In The New Silk Road?
  • 2 days Trump Was Right About The Dollar
  • 2 days Is Silver Gearing Up For A Rally?
  • 2 days World’s Largest Hedge Fund Turns Bullish On Gold
  • 2 days It’s Time To Spend More On Clean Energy R&D
  • 3 days Contrarian Investors Are Beating The Stock Market
  • 3 days Bulgaria’s Revenue Agency Falls Victim To Biggest Cyber Heist In History
  • 3 days Amazon Faces European Union Anti-Trust Probe
  • 3 days Commodities Are Having A Stellar Year
  • 4 days Bezos’ Next Big Project Could Be Worth $100 Billion Per Year
  • 4 days 3,600 Years Later, Climate Change Turns Mammoths Into $40M Market
  • 4 days Tesla, Apple Claim China Is Stealing Intellectual Property
  • 4 days EV Giants Duke It Out For Battery Dominance
  • 5 days Tech Billionaire Takes Aim At Google
  • 5 days Chinese Police Bust Largest Ever Illicit Crypto Mining Operation
  • 5 days Expect A Pullback Before Gold's Next Major Rally
  • 5 days Why Interest On Gold Matters
  • 6 days Ten Extravagant Food Items For The Wealthy Only
  • 6 days Why Saudi Arabia Won't Give Up On The Aramco IPO
  • 7 days $32 Million Crypto Heist Halts Tokyo Exchange
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

  1. Home
  2. Markets
  3. Other

What Can We Learn From Economically-Sensitive ETFs?

Cyclicals Have Lost Their Confident Look

We can learn a lot from the chart below, which shows the performance of economically-sensitive stocks relative to the S&P 500. After the S&P 500 bottomed on February 11, cyclicals (XLY) took the lead off the low as economic confidence started to improve. Notice the steep slope of the ratio off the recent low (see green text). The confident look has morphed into a more concerning look as the S&P 500 has continued to rise over the last month (orange text), which tells us to keep an open mind about a pullback in the stock market.

Cyclicals; Very Little Progress Since Mar 1

A similar picture emerges when we examine the high beta stocks (SPHB) to S&P 500 ratio below.

High Beta: Peaked versus S&P500 on March 7


What Can We Learn From The Longer-Term View?

This week's stock market video examines the question:

What can we learn from asset class behavior?

The video covers low beta stocks (SPLV), consumer staples (XLP), Treasuries (TLT), high-yield bonds (JNK), NASDAQ (QQQ), Dow (DIA), NYSE Composite Stock Index (VTI), VIX (VXX), crude oil (USO), emerging markets (EEM), transportation (IYT), energy (XLE), and materials (IYM).


Back To The Shorter-Term Charts

The economically-sensitive materials sector (XLB) has significantly lagged the S&P 500 over the past two weeks.

Materials: Peaked versus S&P500 on March 21

Given the consumer is often referred to as the life blood of the U.S. economy, the tepid relative performance of the retail (XRT) ETF since March 8 is a bit concerning.

Retail: Very Little Progress Since March 8

If problems return to the oil patch, problems may return in the credit markets. Oil peaked relative to the S&P 500 over 2 weeks ago.

Crude Oil: Peaked versus S&P500 on March 17

Transportation stocks have made little to no progress relative to the broader stock market since early March.

Transportation: Peaked versus S&P500 on March 18

Brazil (EWZ) has been one of the best performing ETFs since late January 2016. As shown in the EWZ/SPY chart below, the ratio has stalled in recent weeks.

Brazil: Very Little Progress Since March 10

If credit leads stocks, then the chart below tells us confidence in the current stock market rally may be waning.

Credit: Very Little Progress Since March 11

 

Back to homepage

Leave a comment

Leave a comment