Buy: XLP (Consumer Staples)
Sell: XLY (Consumer Discretionary) TARGET +20% STOP -6%
TPA sees an opportunity to be long XLP (the Consumer Staples ETF) versus XLY (the Consumer Discretionary ETF). The Top 10 sectors and holding of each ETF can be seen in the tables below. TPA has two active BUY recommendations on AMZN (4/9/20 P&L +17.95%, 5/1/20 P&L +5.41%), which is 25% of the XLY and probably most for the reason for it outperforming XLP recently. Still, given the incredible and historic weakness in Retail sales and Employment (charts below) and the 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. After all, 70% of the U.S. economy is directly driven by the consumer and another 20% is indirectly affected by the consumer as business to business decisions are eventually driven by the end-user.
TPA’s reasoning is explained in the charts that follow, which focus on the ratio of XLP/XLY or the relative performance of XLP versus XLY.