The March Higher Continues:

Consumer discretionary was the third best major S&P sector performer in 2017 and 2018, and in the first 6 months of 2019 was second best. Give the space credit, as it shrugs off naysayers that state it is mostly AMZN responsible for the move. It is a big part for sure, but there are some notable leaders in the diverse arena. CMG and SBUX have been a general in the diners, MTCH in the specialized consumer services, TGT and WMT within the discounters, LULU in retail, AN in auto parts. Sure there are laggards, but the consumer continues to spend, even if it is on borrowed credit. There may be a day of reckoning on the horizon, but until the charts PRICE action warrants a sale, let the train run.

Who Is Sleeping Well?

With the precipitous fall in the 10 year yield recently, to put it nicely, homebuilders have been a big beneficiary. When people buy homes, they need to buy mattresses. That may not be the only reason they do, as the saying goes you can not put a price tag on a good nights rest. Below is the ratio chart comparing TPX to SNBR. It shows the former is acting better, and it is just 6% off most recent 52 week highs, while Sleep Number is 15% off its own recent peak (Sleep Number changed its name and is the former SCSS, a move I abhor). From an individual chart perspective however, SNBR looks decent right here after todays gap fill on 7/25, from the huge earnings related gain on 7/26.

Examples:

The seemingly essential need for yield is boosting safer, boring names (even today with a robust intraday reversal saw the three best performing groups hailing from the materials, staples and real estate sectors). Below is the chart of KO, and how it was presented in our 8/5 Consumer Note. For sometime it played second fiddle to rival PEP, but no more. The stock is lower by just 3% from most recent 52 week highs, half of Pepsi being 6% from its most recent peak. Its chart complexion looks better as well as Coke is above a rising 50 day SMA, while PEP is swimming below a downward sloping line. And relative strength this week is in KO’s favor as well being higher by 1.6% this far, while PEP is DOWN .1%.

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