When Mega Caps Fail:
“Live by the sword and die by the sword.” One can not have it both ways. When the mega caps were in favor of the waterlogged XLY, with its top 2 holdings in AMZN and TSLA (representing more than one-third), the fund thrived. Not it has come back to haunt it. In 2022 the XLY fell 37%, its first annual decline in 13 years. Tesla is now more than 70% off most recent 52-week highs, as Musk is shredding many billions of dollars in his personal net worth. The stock recorded a WEEKLY bullish hammer candle last week, which was also a bullish counterattack pattern too (almost identical CLOSING, not far from the very round par number. AMZN is 51% off its annual peak without the courtesy of a 2:1 split, a dry attempt of humor, and it has not registered back-to-back WEEKLY gains since early August. Is the weakness of the XLY representative of the consumer discretionary space as a whole? I say no as some stocks are defying the overall weakness, as seen with the RCD outshining the XLY on the chart below. But we are in a firm downtrend, and buys should be tactical in this type of environment.