Consumer Discretionary and Retail Continue to Lead the Market


The Equal-weight Consumer Discretionary ETF (RCD) and the Retail SPDR (XRT) hit 52-week highs in price and relative strength this week. New highs and relative strength in these two groups is very positive for the market overall. As its name suggests, the consumer discretionary sector is the most economically sensitive sector. Retailers feature prominently in this sector and retail spending accounts for some 2/3 of GDP. If performance of these two ETFs is indicative of consumer spending, then the economy and broader market are in good shape. Neither shows absolute or relative weakness for the moment.

Click this image for a live chart.

The first chart shows RCD within a large rising channel over the last 18 months. The ETF is now in the upper half of this channel and the upper trend line extends into the low 70s over the next few months. Support is marked in the 59-60 area. There is also a smaller rising channel taking shape since November. The ETF is nearing the upper trend line of this channel and getting short-term overbought. The second chart shows the Retail SPDR (XRT) with similar characteristics.

Click this image for a live chart.

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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