The Consumer Discretionary Sector Is Another Way To Trade Amazon.Com

| About: Consumer Discretionary (XLY)


You can celebrate holiday spending by trading the Consumer Discretionary Select Sector SPDR Fund ETF (XLY), which a bushel basket of 85 retail stocks. (AMZN) is by far the largest component with a 17.11% weighting.

This retail-oriented ETF also includes four components of the Dow Jones Industrial Average, Home Depot (HD), Walt Disney (DIS), McDonald’s (MCD) and Nike Inc (NKE).

Record high household debt could cloud theholiday spirit as Main Street awaits tax reform.

Weekly Chart For XLY When you invest in a sector exchange-traded fund you are participating in a segment of the S&P 500 without the challenge of stock picking. In the case of the Consumer Discretionary Select Sector SPDR Fund (XLY) there are 85 retail-oriented stocks.

If you picked (AMZN) you would be out-performing the ETF, but thanks to the momentum of the on-line retail giant, the consumer discretionary ETF set an all-time intraday high of $93.21 on Thursday. With the ETF your investment is heavily-weighted to Amazon with its 17.11% weighting, and you did not have to pay more than $1,000 a share. In addition, you have a 7.48% stake in Home Depot (HD), 6.03% in Walt Disney (DIS), 5.14% in McDonald’s (MCD) and 2.84% in Nike Inc (NKE). These five stocks are 38.6% of your investment in the ETF.

Based upon what I see in my community, holiday spending is off to a robust start. Consumers on Main Street, USA are anticipating a tax cut in 2018 and appear to be spending accordingly. United Parcel Service (UPS) is already operating their holiday cart deliveries from a depot in the community parking lot. The U.S. Postal Service is operating separate trucks seven days a week delivering packages mostly from our local Amazon fulfillment centers. I have not noticed additional deliveries from FedEx Corp (FDX) yet.

Investors need to be aware that household debt rose by 0.9% ($116 billion) in the third quarter to a record $12.96 trillion. This includes increases in mortgage, student, auto and credit card debt, which rose by 3.1%.

Household Debt - Q3 2017 The Consumer Discretionary Select Sector SPDR Fund (XLY)

Weekly Chart For XLY Courtesy of MetaStock Xenith

The weekly chart for the consumer discretionary ETF ($93.13 on Nov. 16) is positive but overbought with the ETF above its five-week modified moving average at $91.69. The ETF is well above its 200-week simple moving average or “reversion to the mean” of $77.52 which was last tested during the week of Sept. 3, 2010 when the average was $30.61.

Based upon this analysis, reduce holdings on strength to my quarterly, monthly, semiannual and annual risky levels of $93.41, $94.47, $96.76 and $97.00, respectively. I do not show value levels at which to buy on weakness at this time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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