Bubbling Under The Surface:

In my humble opinion, the consumer discretionary group overall is showing soft-action, which many are not talking about. Case in point the ratio chart below comparing the XLY to the XRT. The XLY is outshining its “equal-weighted” peer in the XRT. And this is with some very weak action regarding the top 10 components. AMZN is 14% off its annual highs and trades below its 200 day SMA (give it credit for holding round 3200 number again last week, a rough level of support since May). NKE has found support at its rising 200 day SMA and last week gained nearly 4%, while the XLY rose just 1%. SBUX is doing its best to hang onto its 200 day SMA too and needs to hold the 110 level which is a bear flag (break below carries measured move to very round par figure). Perhaps more concerning has been the overall action of some consumer leaders. Stocks like CROX are quickly in bear market mode 23% off highs from just 9/23. DECK is freefalling down 120 handles in the last few weeks, and WSM is now 16% off its 8/26 high which reversed hard at the very round 200 number. Should be an interesting last 2 1/2 months in the sector. It needs to step up here or could be in for a spooky year-end.

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