SML:XLP Weekly Chart; The Keystone Speculator's Small Caps to Consumer Staples Ratio Stock Market Indicator

The SML to XLP ratio helps assess the feel of the stock market and whether the vibe is leaning bullish for the intermediate and long-term ahead (week, months, years) or bearish. Use the 85-week MA as the demarcation line. When the ratio is above, the wine is flowing like water, the one-half of America that owns stocks are celebrating rising equity prices and people in general are spending money and having fun. The small cap stocks outperform consumer staples (toothpaste, toilet paper, hygiene products, cereal, Coke, etc...).

When times get tough, folks shun the small caps and avoid the more risky speculative stocks and instead buckle down and pinch pennies. They focus on the key consumer staples they need for the family and want out of the stock market when the US is slip-sliding into recession or at least slow growth.

For the last two years, it is all bullish joy. Then the Q4 2018 -20% crash occurs in the SPX. The chart above gaps down on the weekly basis and loses the critical 85-week MA ushering in bear market negativity. Price is now working its way back up for a potential back kiss of the 85. If the bulls recover, the ratio may shoot for the gap-fill at 18.0-18.5. Keep an eye on it. All hope is lost now that the 85-week is lost. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.