Size Matters:
The XLY is clinging on to the third best performing major S&P sector YTD, higher by nearly 25% (industrials and communication services are within 1 percentage point). The ETF is 4 sessions into a possible handle on a cup base, and tomorrow would complete it with a potential pivot of 124.49. It trades just 2% from most recent 52 week highs, while the XRT still wallows near bear market territory off by 18% from its most recent yearly peak. The more diverse retail ETF, whose largest component makes up just 2.3% of the fund, just broke above a downtrend line, as seen below on the ratio chart compared to the XLY. The latter’s top holding is AMZN at nearly 22%. Is this move on the ratio chart a bull trap? AMZN will have a big say in the answer to that question. After a double top at the very round 2000 number last summer and this July, a move above its 50 day SMA will give the chart a nice look as it builds the right side of a cup base. If it does indeed come into contact with 2000 heading into year end, i would also be a WEEKLY bullish ascending triangle, and a breakout would carry a measured move to 2700.
Reverse Split Mania:
Having been to Ireland several times in the last few years, I have been exposed to some attempted humor. One joke goes, “did you know what the fastest growing city in the world is? Dublin, as its population keeps doublin and doublin” (get it?). Not sure what is more crazy, but rivaling that is the near “doubling” in PRICE from stocks that have undergone reverse splits this June, including PIR and APRN. PIR is still 73% off most recent 52 week highs, AFTER traveling recently from 3 to the very round 10 figure. APRN is also doing battle with the very round 10 number here and still trades 65% off its most recent yearly peak. Certainly makes this recent rally in retail look frothy when names like these explode. STMP has advanced 12 of the last 15 weeks, jumping 130% in the process and nearing a big gap fill from the 5/8 session. Remember this one imploded before then, 3 months prior after parting ways with the Postal Service.
Examples:
The 12.4% combined move during a current 3 week winning streak by the XRT, surely lifted the vast majority of boats in the space. Many were unwarranted, and included in that conversation could be the chart below of VRA and how it appeared in our 9/13 Consumer Note. The stock is still 43% off most recent 52 week highs, even with the jump of more than 13% the week ending 9/13. A few factors have us bearish on this name, number one the upside gap fill from the 9/3 session that was in unison with the very round 10 number. That same level could be considered a breakdown below a bearish descending triangle that began in mid March and carries a measured move to 5.50.