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The discretionary consumer sector, as measured by the Consumer Discretionary Select Sector SPDR (NYSE :), has so far increased by more than 22% in 2019 and has underperformed the wider, which has increased by more than 23%. The group started to underperform the broader stock market after it slipped in mid-September. The big problem is that this decline may only get worse.
You can blame the top three stocks in the ETF for the lack of performance, Amazon.com Inc (NASDAQ :), Home Depot Inc. (NYSE 🙂 and McDonald & # 39; s Corporation (NYSE :). Combined, the three companies make up around 30% of the sector based on their weightings. Amazon is by far the largest weighted stock, accounting for 22%, double Home Depot with 11% and more than the triple weight of McDonald's 6.5%.
More expires ahead?
The discretionary ETF for consumers has fallen by around 2% since mid-September. The problem is that it is rising. Now the technical graph shows that the ETF is testing an important level of technical support in an upward trend, which began in August. If the ETF fails and falls below the aid, it may fall to around $ 116 – a fall of a further 4.2% from the price of around $ 121 on November 14.
The relative strength index (RSI) is generally lower in trend since the ETF peaked in mid-July. This would suggest that bullish momentum is leaving the sector and that stock could fall.
McDonald’s Sinks
McDonald & # 39; s has witnessed the sharpest decline, falling by nearly 11% since September 9. The steep decline only grew in mid-October after the company reported weaker than expected quarterly results, followed by the CEO's departure just a few weeks later. The stock has broken a long-term uptrend that has existed since August 2018. Equity now shows a technical level of approximately $ 195, which means that the share can fall even further to $ 178.50.
McDonald & # 39; s daily price chart
Amazon has disappeared
Amazon's share has not performed much better, declining by more than 4% over the same period. Amazon's share has been trading mainly sideways since the end of July after it also reported weaker than expected earnings. The stock also broke an upward trend that began in March 2018, and he too is likely to fall further, possibly to around $ 1,700.
Can Home Depot save the group?
Home Depot performed the best in the group and increased by more than 1% in the same period, but that is still much worse than the gain of nearly 4% in the same period. Compared to its two peers of consumers, the Home Depot chart appears to be the strongest, rising in a long-term trade channel that began at the end of 2018. around $ 250 – an increase of around 6% from the current price of around $ 236. However, it seems more likely that shares will be consolidated sideways in the coming weeks, heading back to the bottom of the channel.
Home Depot Daily Price Chart
The discretionary consumer sector may continue to struggle in the coming weeks if the above three shares cannot get their promotions together. They are incredibly important for the success of the group: if they fall more, it is likely that the entire sector will go down with them.
