In June I started writing about the possibility of a summer crash and it was obviously a tough season for stocks.
Now, however, I see a fall melt-up in equity prices.
My reasoning for this has nothing to do with gut feeling, but rather has to do with listening to the message of the markets. The same approach that led me to write in June that a summer crash was likely is now indicating a move higher is a high probability scenario.
One way to determine if the conditions favor a risk-on move is to look at the price ratio of the Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP) relative to Consumer Discretionary Select Sector SPDR Fund (NYSEArca: XLY).
As a reminder, a rising price ratio means the numerator/XLP is outperforming (up more/down less) the denominator/XLY.