XLP:XLY Consumer Staples/Discretionary and SPX (S&P 500) Weekly Charts

When the XLP:XLY chart moves higher, it represents a consumer that is worried and buying staples such as toilet paper, soap, toothpaste, hygiene products, canned goods, as well as stocking-up on alcohol and cigarettes. For many humans coping with daily life, booze and ciggy's are a staple.

When the XLP:XLY chart moves lower, that indicates heavier buying in discretionary items such as the midlife crisis Corvette, lavish household appliances with all the bells and whistles, specialty items, expensive handbags, Skidoo's, jet skis, as well as taking long extravagant vacations in exotic locations. Life is one big party and stocks rally to the moon. It does not matter that the worthless crap that you buy will end up on the curb next year.

In early 2020 at the start of the pandemic, the stock market begins dropping in sync with the XLP:XLY ratio moving above the 31 MA. That was short-lived since America's scum crony capitalism system started dropping money from the sky created by the Federal Reserve (monetary stimulus) and Congress (fiscal stimulus). It was party time again. Life is one big party under crony capitalism, that is, until it abruptly is not.

At the end of 2021 going into 2022, the ratio again pops above the signal line indicating that consumers are worried. Time to buy more toilet paper and canned goods. The stock market sags in 2022 due to the negative vibe in society. People choose to spend their money wisely, not foolishly, and are stocking-up on items they need, ditching the visits to restaurants and instead eating and making coffee at home.

The stock market bottoms in October 2022 as speculators look for bargains and buy the dip especially with charts setting up with positive divergence. The ratio collapses in April-June of last year ushering in more frivolous spending on junk you do not need. The wealth effect occurs during these positive periods. Stocks are going up and up so people puff their chests out feeling rich so they buy more discretionary stuff.

Each turn on the charts occurs within 1 to 3 months of one another. Stocks will tend to bottom and recover for a month or two before the ratio follows by dropping sharply but the tops typically occur in closer unison with the ratio jumping higher.

Okay, that said, the ratio jumps higher. The XLP:XLY moves above the 31 MA signal line a couple months ago, and even completes a back kiss, and continues higher. How can that be with the stock market at a new all-time high? The prior high in stocks in March/April is timed with the ratio jumping higher above the signal line so the expectation would be for stocks to continue lower and not make new highs.

Since the SPX is not listening, instead choosing to believe the have's that all is rosy, the expectation is for stocks to top out right now, now, and begin dropping. Otherwise, to sustain higher stock prices, the consumer should go out and start spending money like mad on frivolous discretionary items. This is not the likely outcome in fact it is the opposite. People will tighten belts further.

America is watching a class battle between rich and poor the have's and have not's. The Fed printed money for over a decade rewarding the wealthy elite and their upper middle class sycophants with vast riches (high stock prices). One half of Americans do not own a single share of stock. The have's are the ones spending the money and keeping the economy afloat creating the confusion in the data.

The have not's are rubbing two nickels together hoping they have enough money to get through the month. Oh, we don't honey? Well, keep putting the food and the electric and gas bills on the credit card. Welcome to crony capitalism in America, another system that will be tossed on top of the dustbin of world history. Greed is the most powerful human force that destroys everything.

Retail data shows that May spending accelerates but what are the consumers buying? The have's and have not's are both buying toilet paper, hygiene products, canned goods, alcohol and tobacco but only the have's are buying discretionary items. People are buying 'styrofoam boxes for the ozone layer' as Neil, the Godfather of Grunge, sings. Time to rock-out. Hand me that guitar, Sonny. Rockin'null in the Free World. 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.