Amazon Effect Muted:
Below is the ratio chart comparing the more diverse, smaller cap XRT to the top heavy XLY. This chart certainly benefitted from the Russell 2000’s November surge, but has certainly been aided by AMZN’s sideways trade since the beginning of September. We are well aware of Amazon comprising of more than 20% of the ETF, and one has to believe that there will be some mean reversion at some point, as the consumer juggernaut resolves itself most likely to the upside from its recent consolidation. Other top 5 holdings in the XRT that are weighing it down include HD and MCD both of which are in the process of completing possible bearish rounding top patterns. This week again the XRT is demonstrating excellent relative strength higher by 2.3%, while the XLY is lower by 1.4%. The XRT has outperformed the XLY on a WEEKLY basis 6 of the last 7 weeks, and expect that relationship to continue in the XRT’s favor.