Among traditional market capitalization-weighted sector exchange traded funds, utilities funds are leading the way this year.
Looking at the nine sector SPDRs, investors will see the Utilities Select Sector SPDR (NYSEArca: XLU) is running away from rival sector ETFs in a sign that investors are displaying a preference for conservative sector fare. Including dividends, XLU is up 10% this year, an advantage of 440 basis points over the second place Health Care Select Sector SPDR (NYSEArca: XLV). [Utilities ETFs Flex Their Muscles]
In further confirmation that investors are eschewing riskier sector bets, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) is the only one of the nine SPDR ETFs that is in the red year-to-date. Remember that XLY has been a sector ETF lead for much of the past three years. Over that time, XLV is the only SPDR that has outperformed XLY.
The discretionary sector’s near-term outlook is not encouraging, at least not from a technical perspective. It is the only one of the 10 S&P 500 sectors currently residing below its 50-day moving average notes technical analyst Andrew Thrasher.
“In early March we saw the consumer discretionary sector put in a false break above its January high. Buyers were unable to maintain control as XLY retreated back under $66 and continued to weaken from there. With the false break we saw a host of negative divergences take place. First, in the top panel of the chart below, we have the Relative Strength Index (RSI) which put in a lower high, a bearish divergence,” writes Thrasher.
XLY currently resides about 0.8% below its 50-day line, but the fund is not the only offender among discretionary ETFs. The Vanguard Consumer Discretionary ETF (NYSEArca: VCR) is trading just below its 50-day moving average as well. Both ETFs are down about 2.3% in the past month. [Consumer Discretionary ETFs Look to Rebound]
“All three of these metrics, momentum, breadth, and relative performance, have continued to weaken since the false breakout earlier this month. Traders do not seem to be showing signs of bullishness for this sector and with the latest price action, it doesn’t seem the mood is shifting anytime soon,” notes Thrasher.
Identifying culprits behind the weakness of discretionary ETFs is not difficult. Of XLY’s top-10 holdings, a group that combines for about 45% of the ETF’s weight, only Priceline (NasdaqGS: PCLN) has trader higher this year.
Consumer Discretionary Select Sector SPDR
