So, we've seen the broader markets drop a few percentages the last few weeks and then we've seen it recover a bit. Growth is arguably still in downtrend territory and even financials and energy pulled back a tiny bit. How far this decline will go or how long it'll last is currently a mystery. For all we know, we could be at the start of a bear market. So, even though we don't know how long it'll last we can still try and gauge it a bit by taking a look at some of the more defensive assets or in particular some defensive stocks and see how they're faring. A few of these defensive stocks are in the process of breaking out of consolidations on monthly scale charts... Even if you're not a fan of technical analysis, consolidations breaking out on monthly scale charts are occurrences that require your maximum attention.
Take a look at the consumer staples ETF compared to the S&P500. The ratio found support around the 2000 lows which does give us a reason to believe that there's about to be some renewed strength for consumer staples in the next few weeks to months.
We further find evidence of this when we take a look at some consumer defensive stocks in the US on monthly scales. A few of these stocks are breaking out to new all-time highs after lengthy consolidations. As I mentioned before, breakouts on monthly scale charts should be taken very seriously. These breakouts rarely fail and provide you with investment opportunities that don't appear too often.
These consolidations don't mean we're heading for bear market territory. However, it is something we should keep in mind when trying to gauge where the broader market is heading. If consumer defensives start outperforming than we should be able to form an opinion on what that means for risk appetite.