TPA sees an opportunity to go long XLP (Consumer Staples) and short XLY (Consumer Discretionary).
- PAIR: XLP/XLY
- Buy: XLP (Consumer Staples)
- Sell: XLY (Consumer Discretionary) TARGET +20% STOP -6%
The Top 10 sectors and holding of each ETF is shown in the tables below. TPA has two active BUY recommendations on AMZN, which is 25% of the XLY. It is also most of the reason for it outperforming XLP recently.
Still, given the incredible and historic weakness in Retail sales and Employment, there is a technical vulnerability of many of the top holdings in XLY. TPA sees the positive action of AMZN eventually being overwhelmed by XLY’s other constituents.
With 70% of the U.S. economy directly driven by the consumer, and another 20% is indirectly affected, the end-user eventually drives business to business decisions.
TPA’s explains its reasoning in the charts that follow. The focus is on the ratio of XLP/XLY or the relative performance of XLP versus XLY.