Equal Weight Stripping Out The Noise:
When comparing the XLY to the XRT it is a bit misleading. One is basically looking at the relationship between AMZN and TSLA and the staples sector. To be fair the XLP is highly concentrated as well with the top 4 components in PG COST PEP and WMT making up 45% of the fund. We wrote about AMZN yesterday in our Consumer Discretionary Note and it is on a 4-session losing streak (but recorded a bullish hammer Tuesday), and now undergoing a critical test, as it attempts to prove it is worthy of remaining above its 50-day SMA, a line that has now been touched 6 times in the last 8 weeks (I am a believer that the more time a line is touched the weaker it becomes, especially so many times in rapid succession). The ratio chart below contrasting the equal weight discretionary to staples still speaks to “risk on” in the consumer space. But remember this is a relative chart, and it does not mean both groups can not act sickly on an absolute basis. But it does still indicate consumers are still buying “wants” over needs, which could bode well for a Q4 rally.