Things You Don’t See in a Bull Market

A couple of weeks ago, the analyst team and I put together what we called a “bearish checklist”.

We spent an hour breaking down what needs to happen for the bull market to end.

I’ve talked about a bunch of these key levels in recent posts.

From red flags in credit spreads to the Mag 7 violating a confluence of support, to fewer uptrends holding up beneath the surface.

But there is one more chart I need to share with you—Consumer Staples on a relative basis.

Staples are defensive by nature—they’re the go-to safety trade in equities, making them a great barometer for risk appetite.

And right now, they just reclaimed a critical level of support relative to the S&P.

This is a BIG level.

It lines up with the dot-com bubble period.

This relationship has been around for decades, and in every past cycle, it’s been a solid tell.

It’s no surprise that the S&P has put in a 10% drawdown when you consider that XLP is outperforming this year.

The message is clear. As long as we’re above that shelf of former lows, I expect a risk-off environment.

The selling pressure is likely continuing.

However, if Staples break back below this level, it could be a huge feather in the cap for the bulls.

We’re in capital preservation mode right now.

Volatility has taken hold of the market, and there is little evidence of it subsiding just yet.

I would love to hear your thoughts!

Cheers,

Alfonso