The September article stated the trend of the above ratio acts as a sentiment indicator.
When the ratio trends higher, it means investors favor lower-beta stocks, causing the consumer staples ETF to outperform higher beta consumer discretionary stocks. Basically, when investors are afraid of equity volatility, staples/need outperforms discretionary/want.
Notice that the ratio continues to trend lower. This is very bullish, and it means defensiveness is coming out of the market. The persistence of this ratio trend means that despite the huge move up in equities, the fall melt-up may still be in its early stages.
The author, Pension Partners, LLC, and/or its clients may hold positions in securities mentioned in this article at time of writing. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.