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After a vicious selloff in last week’s trading action, Consumer Staples have bounced from longer-term support, attempting to make up for lost ground from heightened volatility. The price action remains similar in many of the industry groups, and bulls will want to see these levels held to the upside to be constructive in the space. New lows have spiked from an extreme high to an extreme low after the recent strength, but the question remains; is the foundation strong enough to rally once again?

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S&P 500 Consumer Staples 

After a strong selloff and test of support at the 730 level and the December ’21 lows, Consumer Staples have rebounded out of support below a declining 50-day moving average. Relative to the S&P 500, the group trades above the highlighted relative support zone above the ratio’s rising 50-day moving average. Bulls in the space are looking for the 730 zone to hold, as those lows were the start of the group’s outperformance since late last year.

Food and Staples retailing have recovered the 570-support zone after a brief breakdown late last week after this month’s selloff below the declining 50-day moving average. Relative to Consumer Staples, the group has lost its uptrend of outperformance and trades below the ratio’s declining 50-day moving average. While the price action appears to be capitulatory in nature, investors would be prudent to have patience for bullish evidence to present itself before becoming too constructive at these levels.

Food, Beverage, and Tobacco have managed to recover both the 845 zone and the rising 50-day moving average to the upside in yesterday’s trading session after slicing through these levels to the downside late last week. Relative to Consumer Staples, the group has broken out of long-term relative resistance to the upside above the ratio’s rising 50-day moving average. While the absolute price action is not the most attractive, relative performance in the space provides a prime example of what “less bad’ looks like in this market.

Household and Personal Products have rebounded out of long-term support at the 815 level below the flat 50-day moving average, unimmune to the selling pressure of last week. Relative to Consumer Staples, the group appears to be making a valiant attempt at a relative bottoming process at the highlighted level, but bull in the space want to see the ratio’s flat 50-day moving average make a turn to the upside.

Breadth 

After spiking to the 25% level last Thursday, Monday’s trading session saw the percentage of Consumer Staples components making new one-month lows cross back below the 5% level as the sector has staged a rebound from long-term support. There were 13 instances since 2002 where the percentage of Consumer Staples components making new one-month lows crossed below the 5% level after being greater than or equal to the 25% level for a median gain in the sector of 3.56% with a 75.00%-win rate over the following quarter. It’s worth noting that median gains have tended to peak 43 trading days out at 3.89% on a slightly reduced 66.67%-win rate, so consideration should be given to hold times. While these results have been attractive, investors would be prudent to approach them with reduced enthusiasm due to the small sample size (13).

This note is a preview of our Thursday Sector Deep Dive. See our thoughts and more in the full report.

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