It's not a secret around here that market breadth started to deteriorate in February.

If you recall, that's when everyone had a SPAC.

The IPO index peaked, ARK Funds, Biotech, the new highs list, etc all stopped going up.

That was over 10 months ago.

But more recently, market breadth is getting all the attention. Everyone is a breadth expert now, you notice?

I'm even getting software developers asking me about my breadth analysis wishlist so they can build it for me. Which I love and I certainly appreciate, but just goes to show you another sign of the times.

The way I see it, if you're trying to get defensive NOW because of breadth deterioration, I think you might be looking at it completely wrong.

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Outside of the large-cap averages in the US, most stocks have been stuck in sideways trends for much of 2021. We’ve seen breakouts fail in both directions over the past two months, as sloppy price action continues to govern the broader market.

As we discussed in our last intermarket post, this range-bound action has not just been the case for stocks on an absolute basis. We’re seeing the same thing from commodities, cryptocurrencies, and even our risk-appetite ratios. Risk assets have simply been a mess.

Let's take a look at one of our favorite risk-appetite ratios, as there's been an important development in the discretionary versus staples relationship. 

Here is large-cap consumer discretionary $XLY versus consumer staples $XLP: 

Notice how this ratio was rallying aggressively coming into 2021. Now think back to what stocks and other risk assets were doing during this time. Everything was working, right?

Consumer discretionary...

We talk a lot about relative strength around here.

"Which are the strongest stocks and sectors?"

"Buy high and sell higher!"

"What's on the new 52-week high list?"

"How many new highs are we seeing?"

These are all questions we're regularly asking. Like every day.

But at the same time, it's important to understand what's not working. And what are the implications of those things not working?

There are two main groups on my radar.

This is the video recording of the December 2021 Mid-month Conference Call.

From the desk of Steven Strazza @Sstrazza

It's been about a month since small- and mid-caps resolved to the upside and made fresh highs.

As we all are aware, these were simply massive head-fakes. We're right back to where we started--stuck in the middle of the same range we've been in all year.

There was also plenty of evidence from our intermarket relationships and ratios to support these moves. Discretionary-versus-staples ratios broke to fresh highs. Copper versus gold. Stocks versus bonds. Inflation expectations. They all made new highs recently. But, just like most stocks on an absolute basis, many of these breakouts have since failed.

Of all these developments, it's hard to argue that any is more important than the stocks-versus-bonds ratio retracing back beneath its Q1 highs. With long rates making new lows and stocks selling off, let's talk about how we are approaching both of these asset classes right now.

Here's the S&P 500 $SPY relative to long-term Treasury bonds $TLT, zoomed out to the early 2000s.

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This is the video recording of our December 1, 2021 Monthly Charts Live Strategy Session

From the desk of Steve Strazza @sstrazza 

Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

We consider this our state of the union address, as we break down and reiterate both our tactical and structural outlook on various asset classes. Our ultimate goal is to discuss the most important themes and developments that are currently playing out in markets around the world.

There's been plenty of action these past few weeks. Let's kick things off with stocks and try to make sense of what we're seeing.

Here's our US equities table:

Let's start with a triple pane chart of mid-caps, small-caps, and micro-caps.

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This is the video recording of the November 2021 Mid-month Conference Call.

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Everything's falling into place for the bulls.

Mid-caps and small-caps finally joined their large-cap peers at new record highs earlier this month. A bullish expansion in breadth is confirming these breakouts at the index level.

We're also seeing strong confirmation in the form of other risk assets resolving above key levels of interest.

As suspected, our risk checklist has moved up to its highest level since we began tracking it this summer. This list does an excellent job summarizing the global landscape.

Here’s a look at where things stand presently:

What we’ve done here is pinpoint critical levels in some of the most risk-on markets and relative ratios in order to gauge the current level of risk appetite.

Whether these charts are above or below our levels is...

This is the video recording of our November 1, 2021 Monthly Charts Live Strategy Session

From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge

Most risk assets peaked during Q1 or May of this year and have consolidated in sideways ranges ever since.

But the bulls have started to take control of many of these trends. We're seeing more and more upside resolutions -- and this phenomenon isn't limited to Crude Oil, Rates, AUD/JPY, and cyclical stocks. Similar patterns are also playing out when we look at intermarket ratios, particularly those we use to measure risk appetite.

In today’s post, we'll dive into one of our favorite risk-appetite relationships and check for price confirmation in a variety of ratios.

First up is none other than large-cap consumer discretionary versus consumer staples stocks: 

JC already wrote about the breakout in XLY/XLP this week, which you can read here.

The bottom line is this breakout is bullish for the broader market. Stocks are likely moving higher across the...