Discretionary ETFs Still Face Technical Hurdles

As has been duly noted, the consumer discretionary sector is the worst performer in the S&P 500 this year, but there have some signs that the relevant exchange traded funds are trying to work their way higher.

Over the past week, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) and the Vanguard Consumer Discretionary ETF (NYSEArca: VCR) have gained an average of 1.6%. Add to that, some investors are returning to discretionary ETFs in significant fashion. [A Return to Discretionary ETFs]

“Investors pumped $1.79 billion into consumer discretionary exchange-traded funds in the five trading days through Aug. 6, the most of any group,” reports Lindsey Rupp for Bloomberg.

Since the start of the of third quarter, only the iShares Core S&P 500 ETF (NYSEArca: IVV) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) have added more new assets than XLY, the largest consumer discretionary ETF. VCR has added nearly $85.6 million this quarter.

Those inflows make for nice superlatives, but they do not completely ameliorate the tough technical scenarios still facing discretionary ETFs.

The chart below “clearly shows how VCR violated its 2011 uptrend line back in May 2014.  The following rally interestingly failed to reclaim this uptrend line.  I therefore continue to monitor this trend for further confirmation,” according to J. Beck Investments.