Is Consumer Discretionary Losing Steam?
- Posted by JC Parets
- on January 8th, 2013
It’s possible that the consumer discretionary sector might be slowing down after its monster 200+% run from the 2009 lows. Technician Jonathan Krinsky of Miller Tabak has a note out this morning pointing to the broadening formation in the $XLY that normally indicates indecision between the bulls and the bears. These rare patterns historically show up near turning points, so I think it’s important to recognize it’s arrival in this space.
The consumer discretionary ETF, the XLY, has been making higher highs since mid-September. At the same time, however, it has been making lower lows. The result is a very rare, but potentially bearish broadening triangle, or megaphone pattern.
This type of pattern indicates violent indecision between the Bulls and Bears. Notice the volume has picked up throughout the pattern as well. What is especially interesting is that within the bigger megaphone in place since September, there is a smaller one that has been forming since November.
There are other warning signs as well. On the most recent highs made on January 3rd, RSI vs. the September peak made a lower high (middle pane). Relative strength vs. the SPY also made a lower high vs. November.
Krinsky compares this action in the discretionaries to what the Nasdaq100 looked like back in 2011. The broadening formation that appeared in the $NDX preceded a 16.5% decline in the tech heavy index.:
Something to be aware of…
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- Look What Mid-Caps are Doing
- Fox Business: Crude Oil and Japan
- Webinar Tuesday November 18th: Technical Analysis to Find Global Stock Market Trends
- Radio: Winning On Wall Street – Stocks & Bonds
- Why Economists Will Get Bonds Wrong Again
- Palladium Is Still The Best of the Metals
- Mean Reversion Coming In Energy Futures?
- A Breakdown of the US Dollar Index
- About That Bear Market In Russia
- Featured in November Issue of Traders’ Magazine
Archive by Year