Concentrated Focus:

As we have mentioned before size matters. The XLY is having a very strong YTD performance up more than 26%, and is currently the second best major S&P sector. If the consumer discretionary sector was substituted by the XRT however, it would be the WORST actor of the 11 major sectors, underperforming even the moribund energy and healthcare spaces. The AMZN effect is alive and well in the holding structure of the XLY ETF, and with its influence on the genuine health of many of the XRT components. 

Housing’s David Vs. Goliath Scenario:

In most groups, larger names have been shown the love compared to their small cap relatives by investors, in what may be a sign of a quickly maturing bull market as market participants yearn for safer more “defensive” stocks. In the homebuilders however it seems to be just the opposite. The younger, more nimble players are performing better. Below I have the ratio chart comparing TMHC to TOL, and one can see the relative strength of the former. But I could have used even better examples as MTH and LGIH are higher by 51 and 65% respectively, while TOL and BZH have advanced “just” 13% this year. If one is looking for clues to the next direction, if any at all, of interest rates this year, this space is giving mixed signals.

Examples:

Many have made the statement that unless you have a big presence in retail or are discount you have had a rough go of it recently. Names like COST TGT and WMT prosper. One could throw in DG DLTR and TJX, but the chart below of OLLI, and how it appeared in our 7/9 Consumer Note, is an exception. The stock is in correction mode down 14% from most recent 52 week highs, and peer FIVE is having some issues of its own down 17%. Perhaps as we spoke of yesterday smaller cap discount plays are not keeping pace without the scale their larger competitors have. However both FIVE and OLLI seem to be bottoming here with good risk/reward scenarios. OLLI burst back above its 200 day SMA jumping 5% last Friday. Even for technicians sometimes stocks on sale are a good value. 

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