Amazon Effect:

With the performance of AMZN recently, and give it credit today for recording a bullish engulfing candle AFTER such a big run higher, one would have thought the relationship between the discretionary and staples fund would be a bit more pronounced. However looking on the ratio chart below the XLY has broken above a long digestion period, but only fractionally so. That breakout may go on to powerfully advance, but given that Amazon has jumped 300 handles in the last 13 sessions, one has to give credit to the staples group hanging around. It seems market participants are buying the more speculative stocks in the consumer space, and also purchasing the more conservative names as “hedges” against them. Companies like KO PEP COST and MDLZ are acting very well. On a YTD basis the XLY is doubling the XLP’s advance up 5%, but looking under the hood of both funds has some very interesting opportunities. 

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