— Grant Hawkridge (@granthawkridge) April 3, 2020
Today’s Chart of the Day was shared on Twitter by Grant Hawkridge (@granthawkridge). It’s a ratio chart showing a basket of the offensive sectors (Financials, Technology, and Consumer Discretionary) versus a basket of the defensive sectors (Consumer Staples, Utilities, and Health Care). When the line is rising, it means offensive sectors are outperforming defensive sectors and vice versa. This ratio gives us a good indication of risk appetite among market participants. When offensive sectors are outperforming, it shows us market participants are willing to take on risk in the more aggressive sectors. On the other hand, when defensive sectors are outperforming, it suggests risk aversion among market participants as they prefer to hide out in the “safer” areas of the market. As Grant points out, this ratio has tested and held above a key support level. For now, this ratio supports the bull case for the broader market.