Contrasting Narratives:

As the XLY has jumped 6.5% over the last one-month period, the XRT has struggled down 3%. The latter is a more diverse and “equally weighted” ETF which may speak to some broader weakness in the consumer discretionary space. AMZN and TSLA has risen like rockets and they are the two top heavyweights in the XLY representing more than 40% of the fund. Amazon we spoke about here with its big potential (in our 6/21 Consumer Note) of breaking above a long MONTHLY cup base pattern. It has since done so and its updated daily chart sports a bull flag formation with a trigger right at the very round 200 number and a break above would carry a measured move to 220. TSLA last week sprinted upward by 27% in its best WEEKLY volume since last November and we spoke about this name on 6/28 in our Tech Note as it set up a bullish inverse head and shoulders pattern. It is now approaching an add-on WEEKLY double bottom trigger of 265.23. The chart below shows the different paths the XLY and XRT have embarked on as of late and notice the RSI for the XLY above the overbought 70 number. This is NOT a sell signal as instruments can remain overbought for long periods. If has just reached that lofty altitude, and remember there is nothing more bullish than an overbought situation that remains that way. 

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