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Posted May 20, 2026 at 4:57 am
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Two of the worst market tops shared the same warning sign.
It appeared before the tech bubble in 2000 and the financial crisis in 2007. Both times, the S&P 500 lost roughly half its value in the years that followed.
The signal isn’t always right. It flashed a false alarm in 2014, when the breakdown reversed and the rally kept going for years.
But it’s signaling again right now.
The ratio between Consumer Discretionary and Consumer Staples just broke to its lowest level since June, even as the S&P 500 climbed to a fresh all-time high.
Here’s why the chart matters, and what it would take to invalidate the warning.
The ratio I’m watching is RSPD against RSPS, which compares the Invesco S&P 500 Equal Weight Consumer Discretionary ETF against its Consumer Staples counterpart.
It’s one of the cleanest ways to measure risk appetite beneath the surface of the market.
Discretionary stocks represent the offense, the high-beta and economically sensitive names like automakers, retailers, travel companies, and luxury brands that consumers can delay buying when confidence weakens.
Staples are the defense, the everyday essentials like toothpaste, soda, detergent, and packaged food that people keep buying regardless of what’s happening in the economy.
When investors are confident, they pile into offense and the ratio rises. The opposite happens when confidence weakens: money rotates to defense and the ratio falls.
Right now, that ratio is moving the wrong direction for a healthy bull market. The S&P 500 is hitting fresh records while RSPD/RSPS is making lower lows.
In a normal rally, discretionary should be outperforming staples, but the opposite is happening, and if the trend continues lower, it’s an early warning that something beneath the surface is starting to break.
What This Means for Investors
The divergence is a warning, not a verdict, and bull markets can run while these ratios stay weak for months at a time.
What happens next determines which version of this signal we’re seeing. If RSPD/RSPS turns higher and reclaims its recent range, the divergence resolves and the warning gets canceled. If it keeps falling while the S&P 500 climbs, the case for caution gets stronger every week the gap widens.
The ratio sits at 1.73 today, its lowest reading since June. The 2000 and 2007 setups took months to play out, and the 2014 false alarm reversed within a year.
For anyone trying to gauge whether this rally has staying power, this is the chart to keep on the radar.
If you want more of our daily insight, check out All Star Charts.
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Originally posted 19th May 2026
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