Consumer Names Pointing Too Recession?
The XLY over the last 6 months has more than taken a breather, it is the NINTH best actor among the major S&P sectors, barely positive. The ratio chart below shows how it has lagged the S&P 500, and that should not be surprising given 3 of the 5 top components in the ETF are in correction mode with MCD AMZN and SBUX lower by 11, 13 and 16% off their most respective 52 week highs (NKE lost more than 5% in big trade last week too). To be sure there are still leaders within the broad space, but they seem to becoming less abundant. Take former leisure winners like MTCH and PLNT, both in bear market mode, down more than 20% from their most recent yearly peaks. Autos have seen bifurcation with GM and F traveling down different routes (whatever happened to all the hype surrounding NIO). Some may say the arena is getting frothy, as stocks like JCP FRAN and VNCE have doubled or more since September. PIR did the same, but has since came crashing back to earth. As always play each individual name on its own merits, and keep losses minimal.
With the announcement confirmed that a bid for TIF from LVMH, that sent the stock soaring nearly 32%, some may look at the prospects of competitors. It is not something I would do, but one would expect some sort of short lived bounce of any peers. Below is the chart of SIG, which has been a laggard down 73% from most recent 52 week highs, not a typo. Bottom picking is often a troublesome journey, but it is showing a mildly positive bullish inverse head and shoulders pattern. Each day this week flirted with the 18 pivot, and it is looking weary after Wednesdays drop of nearly 7%. There are most likely better fish to fry in the luxury space, like TPR that pays a dividend yield of 5.1%, and has clung to a big 2 week winning streak of a combined 21% the two weeks ending between 9/6/13. Both TPR and SIG however still have much to prove, and one should stick to leaders in the space, as we know trends are more likely to persist than reverse.
Stocks that break out, or break down, will often go on to retest the spot of the move to prove if it is legitimate. Below is an example of the latter, and the chart of ETSY and how it appeared in our 9/25 Consumer Note. The name REPORTS tonight, and it has recorded back to back double digit earnings related drops of 12.4 and 10.7% on 8/2 and 5/9 concerning, after the prior 3 all rose by 16.3, 23.7 and 3.3% on 2/26, 11/7 and 8/7/18. Notice how it not only retested the symmetrical triangle breakdown, but also filled in an upside gap from the 8/2 session, and met resistance at the 200 day SMA with all at the round 60 number. This is what is called a “cluster of evidence”. The stock has dropped more than 10% this week so far, not long after a 9.3% slump the week ending 9/27. Perhaps someone knows something.