Group Outlook:

Unless one has been living under a rock this year, he or she is very aware of the wobbly performance within the home building and auto plays. The housing market is also weighing down some of the periphery plays, and today that was seen in the action of HD. Since a bearish engulfing candle on 9/12 it has fell 14% from their recent all time highs, and Wednesday fell underneath its 200 day SMA. It brings up, the know whats in your ETF as HD happens to be the second largest component in the XHB, and many other periphery plays are nestled into the top 10, including WSM, WHR and FBHS. The fund declined an amazing 18 of 19 sessions between 9/19-10/15. A look at some of the other more traditional retail plays, the footwear play SKX looks poised for further downside as it trades 38% off most recent highs. Perhaps the addition of Kim Kardashian to its endorsement list never helped the bottom line, pun intended.


The performance of the XRT below shows how the ETF is just two weeks from exiting the two back to back weakest months it experiences during a calendar year. The markets will often discount future prices and the holiday season is just around the corner, but benchmarks and individual stocks will typically look out further than a couple months. However the fund, like the overall markets seem to anticipate that one month in advance, as November tends to be one of the better acting months over the last 5 years. It certainly does not help when your two largest components, CWH and LB, are down 50% from their most recent 52 week highs (they both are very fractionally the 2 largest to be fair). Even the luxury names like KORS and TIF have descended 18 and 21% from their most recent highs. As always pay attention to the PRICE action of any specific names you intend to purchase.


When one analyzes a group, that person should have an eagle eye on who the generals are in the space. If these select names should start to display negative action a red flag should be flown with authority. In the consumer discretionary space there are legitimate concerns for bulls with this theory. BURL is showing signs of fatigue after it was thwarted at its 50 day SMA Wednesday, and sits 10% off most recent 52 week highs. Below is the chart of a leader, and how it was presented in our Thursday 10/11 Consumer Report, who may have been wounded, but not defeated. We suggested a patience purchase near the gap fill from the 8/30 session at 139. It looks good so far but is running into fellow peer problem of BURL, as it was rejected near its 50 day line as well today. They key as we have mentioned recently is for a name to quickly reclaim it. LULU did just that recouping the line in just 5 days back in early August. Will it do so again?

This article requires a Chartsmarter membership. Please click here to join.