Consumer Staples Perking Up

They are not fancy. Cereal, toilet paper, detergent. Things you use everyday. Staples of everyday life. And lately they have been a horrible place to put your investment money. But that may be changing. After a long run lower the ETF that tracks Consumer Staples is starting to perk up. Will it stick?

The chart below shows the Consumer Staples ETF, $XLP. It made a top in January with the broad market, and then turned lower. But where the small caps turned up and then the Nasdaq followed, Staples just kept going lower. In hindsight, they may have bottomed at the beginning of May, we just did not know it then. That is because it was not until the end of last week that they started to move higher.

Thursday it broke over the falling trend resistance that had been in place since the top in January. Friday it moved up over the 50 day SMA for the first time since January as well. Momentum has also moved into bullish territory. The RSI has ticked up over 60 with the MACD rising and positive. Finally, the Bollinger Bands® have opened allowing a move to the upside after a tight squeeze.

All this has led to a good start for a reversal in Consumer Staples. For it to show real strength the next step is a move over April high, filling the gap. That would likely take it to the 200 day SMA for the next real test of strength.

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