Risk on/Risk off, XLY:XLP ratios, THE Real money flow indicator.
Was recently shown this little gem of a ratio chart that will help gauge strength to certain markets such as the stocks and other financial instruments as the S&P , Dow Jones etc
So what does it all mean??
The ratio of two diametrically opposed asset classes often provides insightful clues about what investors are doing.
The XLY:XLP ratio is a perfect example. Its not a hypothetical as it uses real money data based on what investors are DOING and NOT what they maybe thinking or projecting…
XLY is the which tracks the consumer
discretionary sector XLY’s top 5 holdings are…
So how does this affect markets?
When the chart value rises its a clear indicator that people are happy to spend freely and without caution, investors will look to increase risk, where as if the value starts to go down and decline, people are spending more on everyday essential items and thus stock markets are in shrinkage, decline and investors are taking LESS risk.
we can clearly see how this chart reflects current highs on the stock indices if we compare to the current S&P500 , Russel, Dow Jones and so on
If this article has helped or you have any further questions, please leave them in the comments below…..