Amazon Not Primed:
The behemoth recorded its 6th consecutive WEEKLY loss Friday, its first in the last 5 years. More importantly it CLOSED beneath its 200 day SMA, now the fourth time it has done so in 2019. The previous three all recaptured the long term moving average within days. But is the amount of times undercutting the line becoming excessive? The prevailing wisdom is the more time support is touched the stronger it becomes. I have never been a believer in that theory, and unless there is a very rapid recovery above the line once again, the stock could be in for some pain in the near term. AMZN is by far the largest component in the XLY at more than 21% of the fund, but it is also the 3rd largest holding in the Nasdaq just above 6%. Like AAPL it will have a big say in what is next for not only discretionary, but the markets themselves.
Discount Bifurcation:
Discount names which are often seen as defensive and can insulate a portfolio somewhat in a downturn have not behaved that way as of late. Of course WMT rose 6.1% after a well received earnings report on 8/15. But smaller cap names like FIVE OLLI and BIG have performed poorly down 23, 24 and 59% from most recent 52 week highs. Below is the ratio chart of two supertankers in the group, and it demonstrates very different paths. TGT rose almost 23% this week in the second largest volume in the last 5 years. KSS on the other hand has been nearly cut in half, without a 2:1 split (stab at humor). Rumors have been swirling for some time that AMZN may have interest in acquiring the stock, and maybe down here it is becoming more attractive. But to base an investment decision on the hopes of a takeover should never take place.
Examples:
Footwear names have been somewhat left behind in the overall discretionary move higher. NKE trades 11% off most recent 52 week highs, and peer UAA is now 35% off its most recent yearly peak. CROX and SKX are deep in bear market mode off 27 and 28% respectively from recent highs. Below is the chart of another laggard in the space SHOO, and how it appeared in our 8/22 Consumer Note. Breakouts and breakdowns are often tested for their validity and this name did just that, hitting the level of a symmetrical triangle, and has since turned lower. The last 3 weeks have all CLOSED extremely taut within just .13 of each other, and that type of coiling often resolves itself in explosive ways.