The S&P 500 Retail Index has grown at three times the rate of the S&P 500, says Riccardo Ronco, Head of Technical Analysis at Aviate Global, who thinks there is good reason to hold the S&P 500 Retail ETF rather than SPY.
In Chart 1, Ronco shows a monthly chart of the S&P 500 Retail Index versus the S&P 500 from October 1989, with the indices normalized at 100. The outperformance is clear, but Ronco also points to another interesting factor. Normally the top in the S&P is associated with a negative divergence between these two indices, where the stock market carries on higher but the retail index does not (see 2000 and 2007 where relative strength turns down). However, this is NOT the case now, which is a healthy bullish sign for the stock market in general.
See Chart 1 – S&P 500 Retail Index versus S&P 500