I previously made an analysis on this ratio. Here is an update.
Typically the Utilities sector ( XLU ) serves as a hedge in recessionary times. This sector is made up of companies such as water, electricity, natural gas . Companies within this sector usually offer steady and consistent dividends and are less volatile relative to the general market.
The XLU:SPY ratio suggests that when it breaks out above 240-SMA, XLU tends to outperform the SPY . That is what we call RISK-OFF. On the other hand, when it breaks below 240-SMA, SPY tends to perform the XLU. That is what we call RISK-ON.
Currently, the ratio XLU:SPY already tested the 240-SMA and found resistance. I see there was a negative divergence between XLU:SPY ratio and its RSI back in March 2020. Ratio just broke daily uptrend line. My conclusion, we may see higher numbers for the SPY in the following weeks.
Typically the Utilities sector ( XLU ) serves as a hedge in recessionary times. This sector is made up of companies such as water, electricity, natural gas . Companies within this sector usually offer steady and consistent dividends and are less volatile relative to the general market.
The XLU:SPY ratio suggests that when it breaks out above 240-SMA, XLU tends to outperform the SPY . That is what we call RISK-OFF. On the other hand, when it breaks below 240-SMA, SPY tends to perform the XLU. That is what we call RISK-ON.
Currently, the ratio XLU:SPY already tested the 240-SMA and found resistance. I see there was a negative divergence between XLU:SPY ratio and its RSI back in March 2020. Ratio just broke daily uptrend line. My conclusion, we may see higher numbers for the SPY in the following weeks.