“On the relative chart note the rising 200-day exponential moving average which has effectively supported the rally since the March 2009 low,” he wrote in a newsletter this week. “A violation of that average would be evidence against the present bull market. However that looks unlikely anytime soon.”
J.C. Parets at the All Star Charts blog says one of his favorite measures of market strength is the ratio between consumer discretionary stocks and the “more defensive” consumer staples sector. He plots XLY against Consumer Staples Select Sector SPDR (NYSEArca: XLP).
This ratio is at the highest levels since early last year, Parets notes. A continued move to the upside would signal further strength in equities and other “risk-on” assets. “As long as these new highs hold here, and it appears as though this will be the case, I would expect the trend of higher highs in equities to continue,” he concluded.
