Move to Risk Began in July and Continued in November


The market began its move to riskier assets in July and this move simply accelerated over the last two weeks. The chart below shows stocks (risk assets) bottoming in late June and Treasury bonds (safe-haven assets) peaking in early July. The S&P 500 SPDR (SPY) hit a new high this week and the 20+ YR T-Bond ETF (TLT) is trading at its lowest level since January. The indicator window shows the price relative (SPY:TLT ratio) bottoming in February, forming a higher low in early July and surging to its highest level since summer of 2015. This means stocks are outperforming T-bonds and this reflects a strong risk appetite in the US markets. 

This strong risk appetite is also reflected in sector performance since July. The Utilities SPDR (XLU) and Consumer Staples SPDR (XLP) also peaked in the first part of July and both are down sharply over the last four months. Conversely, three of the four offensive sectors are leading the market with bigger gains than SPY, which is up 4.84% over the last 100 days. Notice that the Finance SPDR (XLF), Technology SPDR (XLK) and Industrials (XLI) are up the most of the nine sectors and clearly leading. The Consumer Discretionary SPDR (XLY) which represents the fourth offensive sector, is up less than SPY and still lagging. Nevertheless, three out of four is enough to support a bull market. XLY is the cyclicals sector in this PerfChart. 

Thanks for tuning in and have a good weekend!
--Arthur Hill CMT

Plan your Trade and Trade your Plan 

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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