Don't Ignore This Chart!

Retailers Weigh on Consumer Discretionary Sector


The EW Consumer Discretionary ETF (RCD) got a bounce off support Monday-Tuesday, but gave it all back on Wednesday and broke support with a sharp decline. The chart shows the ETF forming a lower high in April and ultimately breaking support on Wednesday with a gap down. This makes for a lower low and a downtrend in RCD. The indicator window shows the price relative forming a lower high in late March and breaking to new lows in late April. This relative performance indicator moved to new lows again this week and consumer discretionary is the weakest sector in the market right now. 

Retail gets the blame. Retail stocks account for around 30% of the EW Consumer Discretionary ETF. Other prominent groups include media (17.6%), hotel-restaurant (13.5%) and household durables (11%). The next chart shows the Retail SPDR (XRT) breaking support with a sharp decline last week and then recovering with a three candlestick reversal. This recovery did not last long as the ETF gapped down and moved below last week's low. The indicator window shows the price relative (XRT:RSP ratio) peaking in mid March and hitting new lows in May. 

Thanks for tuning in and have a great day!
--Arthur Hill CMT

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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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