Welcome to the XLY ‘Happy Zone’
Consumer Discretionary (XLY) are considered goods and services that are non-essential by consumers, unlike consumer staples. Discretionary items and services are usually more sought after when the economy is strong and consumers are earning more thus spending more.
However, consumers of discretionary goods and services have certainly not been holding back during the pandemic season. A perfect V-shape recovery just goes to show how flush we really are!? Investors in XLY stocks have also become flush having enjoyed a 12-week rally! But it appears that they are now becoming a tad overexcited, high optimism readings are screaming out at us as XLY surpasses monthly resistance at (4). Only three other times over the past year have readings been this high (1,2,3) which resulted in shallow pullbacks. It’s as if consumers and investors alike have become completely detached from the crisis we are currently experiencing or they just choose to ignore it…Whatever the case… Good for them!
If XLY can convincingly hold above this resistance level (now support) at (4) we could aim for 13600 as a first target to the upside. Below support opens the door to 129s.
Short term sentiment is bearish amongst small speculators.