There’s little to suggest this choppy, risk-off environment is fading just yet.
One thing that’s helped me big time this year is tracking risk appetite through key ratios.
These relationships show us how money is rotating and where investors are actually putting capital to work.
My favorite way to do that is by comparing Consumer Discretionary stocks to their Consumer Staples counterparts.
Discretionary stocks reflect consumer confidence—think auto parts, apparel, and homebuilders—while Staples cover everyday essentials like food and toothpaste, making them more defensive during downturns.
Here’s a chart going all the way back to 2005.
RSPD vs. RSPS broke out of a massive base a few months ago, signaling a potential shift to risk-on. However, the breakout didn’t hold, quickly failing and slipping back into the previous range.
As long as this ratio stays stuck below this key resistance level, it’s clear investors are still playing defense.
So until we see Discretionary start to outperform again and RSPD vs. RSPS reclaim those highs, it’s tough to make a strong case for risk appetite returning in a meaningful way.
If you’re looking to navigate this volatility with high-probability setups, Strazza’s been on fire—7 for 7 on recent put trades. He’s back this Friday at 10:30 a.m. Eastern, live, breaking down the charts and sharing his latest ideas inside Breakout Multiplier.
