Discretion Advised?
With recession chatter fading, the XLY:XLP ratio chart shows one of the possible reasons why (I thought the FDX whiff on Friday would heighten it). Notice the last 2 weeks showing strength for discretionary over staples as it powerfully broke above a downtrend. Perhaps one would say that is overwhelming because of the resurgence of AMZN and TSLA. And they would have a valid argument as the XRT is still within a downtrend (notice on the PRICE charts at the bottom here the smooth uptrend over the last 6 months while the XRT trades wide and loose). One has to also keep in mind that the XLP is waterlogged at the top as well with the top 4 holdings in PG COST WMT and KO combining for more than 50% of the ETF. Each of those names are well above both their 50 and 200-day SMAs and in nice uptrends. Getting back to the XLY, TSLA on its WEEKLY chart now sports a bullish inverse head and shoulders formation with a neckline of 260 that I think will be touched in Q4 (since last October it was above that 260 trigger intraweek 4 times, but zero CLOSED above it). A break above the pivot carries a measured move to 380. Give AMZN credit for a strong CLOSE Friday as many market participants faded, and a CLOSE above the 190.70 double bottom pivot. Expect a gravitational pull to the very round 200 number in October, and these two should provide the fuel for the continuing XLY:XLP advance.