New High Parade Extends - What About the Consumer Discretionary SPDR?

The new high parade continued this week with the S&P 500 SPDR and four sector SPDRs hitting new highs. The Technology SPDR (XLK), Industrials SPDR (XLI), Finance SPDR (XLF) and Materials SPDR (XLB) recorded new 52-week highs. The Healthcare SPDR (XLV) recorded a new high for 2019, but remains just short of a 52-week high. The Communication Services SPDR (XLC) and Consumer Discretionary SPDR (XLY) have yet to break out, but both are within 2% of their highs. This assessment is based on closing prices and unadjusted data.

Even though XLY has yet to break out and join the new high parade, I am still bullish on this sector and expect a breakout. First, we are in a bull market environment and this means bullish resolutions are more likely than bearish resolutions. Second, the long-term trend is up for XLY and this is the dominant force at work. The ETF hit a new high in July and remains above its rising 200-day SMA.

The short-term picture is also bullish. A triangle formed over the last few months and this is a consolidation within an uptrend, which makes it a bullish continuation pattern. The swing within the consolidation reversed with a gap-breakout in mid October and this breakout is largely holding, even though XLY stalled the last two weeks. Momentum also turned up the last few days as the PPO(5,30,5) moved above its signal line.

Chartists looking for clues on XLY should watch the five biggest stocks, which account for 48.79% of the ETF (AMZN 22.45%, HD 10.97%, MCD 6.29%, NKE 4.85% and SBUX 4.23%).  

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