Despite Oil, Retailers Hit Relative and Absolute New Highs

“Change must always be balanced with some degree of consistency.” - Ron D. Burton

I think its always important for investors to pay attention to the news, but to do so with an eye towards what the market is signaling either consciously or subconsciously through price. My writings are essentially almost entirely focused on trying to interpret the message of various intermarket relationships because at the end of day I believe what I think does not matter. What matters is what the person I'm selling to thinks, because that is ultimately the person that sets price. And more so than that, actions speak a lot louder than words.

We keep hearing more and more on a near daily basis that rising Oil prices are impacting the Consumer and that it will cause a recession. After all, how can the stock market perform well if more and more money has to go to energy costs, right? It seems fairly logical and fair to think this way. But markets don't seem to believe the narrative. Take a look below at the price ratio of the SPDR S&P Retail Index ETF (XRT) relative to the S&P 500 (IVV). As a reminder, a rising price ratio means the numerator/XRT is outperforming (up more/down less) the denominator/IVV.


If Oil prices are truly such a problem, then why are Retailers relative to the S&P 500 at new all-time highs? Why are Retailers on an absolute basis at new all-time highs? This is entirely inconsistent with the fear people have over rising Oil prices derailing the economy and the stock market. Could it be that Oil prices should naturally be much higher since strength in Consumer stocks suggests the economy is accelerating and that demand is picking up?

Either way, markets may say that they care about high oil, but they don't act like it.

Disclosure: This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.