Discretionary Firm:
The consumer seems to be alive and well. Of course the bull argument is in the numbers, the bear case is that money being spent is on credit on money shoppers do not really have. All that matters to market participants is PRICE action, and that is hard to deny. Below is the ratio chart comparing the XLY to the S&P 500 and it shows the stocks within are behaving well. The largest component in the ETF is AMZN and it is on a current 3 session winning streak, and is in the process of forming a handle on a 9 month cup base (potential pivot is 1964.50). The third largest weighting in the XLY is MCD, and it CLOSED just shy of the round 200 number and is looking for a 10 week winning streak depending on Fridays finish. Investors are loving it, pun intended.
Hard Landing:
The Jet acquisition was supposed to be a threat to the “AMZN effect”, but a look at the ratio chart contrasting the two stocks show its may be muted. Or is there room for two behemoths in the consumer space? I think the latter. The chart below displays the weakness of WMT up against AMZN, but the WMT chart is holding up well on its own. It did record its second straight reversal on earnings today, although it still trades just 5% off most recent 52 week highs. Looking at one year returns however shows a similar path with WMT higher by 18% and AMZN by 20%. Of course AMZN is a higher beta name without a dividend. Both will work for shareholders.
Examples:
The leisure space has been a strong one, and below is a best of breed play HLT and how it was presented in our 5/7 Consumer Report. The round number theory came into play with the 90 figure with 11 of the last 12 sessions CLOSING above the figure, with the lone exception being 5/13. It is demonstrating solid relative strength this week higher by nearly 3%, nice follow through after the week ending 5/3 rose 6%. The stock now trades at all time highs and is outperforming peers like MTN and WYND that are off by 26 and 16% their respective 52 week highs. Stick with the leaders.