Yesterday, the S&P 500 broke out to the upside, and so did the ratio of consumer discretionary to consumer staples stocks (yellow chart).

I have back-tested a system that trades this signal. It has a stop at 2ATR and a profit target at 8ATR. The graph below is the equity curve over the past ten years. The success rate of trading this signal is around 50% (on 13 trades over the past 10 years), but the profit potential is large because when the signal works the market tends to run for a long time. There have been two signals since the start of September.

Hat tip to Edward Clive for suggesting the consumer ratio as an indicator.
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