Checking Under the Hood:
In the consumer discretionary space there are several ways to gauge the overall temperature. First one could look at the ratio chart comparing the staples (XLP) to the XLY, and if we did that we could certainly see a “risk off” environment. The XLP has been outperforming and recently broke above a nice cup base pattern. Other ways include contrasting the broader XRT to the XLY, to see if it is just AMZN and TSLA pushing the latter ETF higher. Below we take a peek at yet another way with the chart of the equal weight consumer discretionary ETF in the RSPD. Its daily chart below shows the instrument sinking and its WEEKLY chart is looking at a 4 week losing streak starting with the bearish shooting star the week ending 7/19 which also retested the peak of a bearish three black crows pattern after the big run from the last October lows. We spoke about this recently being the only major S&P sector in the red on a YTD basis, and perhaps this alone could be a good indicator of recession as we know 2/3rds of GDP emanates from consumer spending. I am no economist but this group is struggling and the weakness is pervasive.