In U.S stock bull markets most sectors will trend with the main U.S. stock indices. Since May of 2023 the Consumer Staples – ETF (XLP) has been lagging the S&P 500 (SPX). The bearish divergence of this important sector is another sign that U.S stocks could be on the cusp of a sharp and deep decline.
Consumer staple stocks are usually the strongest sector in a bull market. The SPX made its final bull market top in March of 2000. XLP made its bull market top in December 2000. In October 2007 the SPX made a bull market peak, the XLP top came in September 2008.
The weekly XLP and SPX chart courtesy of Trading View illustrates their relationship since 2021.
Note the late XLP topping phenomenon continued in 2022 with the SPX all-time high in January and the XLP top in April.
After the October 2022 bottom the XLP was trending with the SPX. Then the situation changed after the XLP high in May 2023, since then its lagged significantly. On 09/01/23 XPX made a new post May 2023 decline low! This is not the type of action you would expect to see in a developing bull market.
The 07/16/23 blog “S&P 500 – Sector Analysis” illustrated bearish divergences in the Financial Sector – ETF (XLF) and Regional Banking sub sector – ETF (KRE). Because XLP is normally an upside leader, its current performance is particularly shocking.
September is seasonally the most bearish month. This combined with a significant XLP bearish divergence implies U.S. stocks could be on the cusp of a sharp and deep decline.
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