Retail ETFs: Be Careful Shopping With Amazon, Home Depot, Wal-Mart

Retail exchange traded funds (ETFs) are a mixed bag this year with two of three funds in the group down year-to-date while the SPDR S&P Retail ETF (NYSEArca: XRT) is up about 2%, a showing that is slightly better than that of the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), the largest consumer discretionary ETF.

However, some market observers see XRT and rival retail ETFs struggling in the weeks and months ahead. XRT’s rivals include the VanEck Vectors Retail ETF (NYSEArca: RTH) and the PowerShares Dynamic Retail Portfolio (NYSEArca: PMR). PMR follows a factor-based index, which weights components based on price momentum, earnings momentum, quality, management action and value.

Related: America’s Less Dressed: 3 Factors Weighing On Retail ETFs.

RTH covers the 25 largest U.S. companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. Top components include Amazon (NasdaqGS: AMZN), Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT).

“The weekly chart of XRT dating back to late 2009 provides us with a structural picture of this sector and how retail stocks have fared in general. Prices remained in an uptrend for six years off of the 2009 lows, but momentum diverged negatively each time prices made a new high. In late 2015, prices finally confirmed those negative divergences by breaking down below the uptrend line from the August 2009 lows and former support near 44,” according to See It Market.