This sector was 1.3% undervalued when I wrote "Book Profits in Consumer Discretionary Stocks" on Aug. 14.
Technically, my benchmark for this sector is the Consumer Discretionary Sector SPDR Fund (XLY), and this ETF became overbought on its weekly chart beginning the week of Sept. 7.
Since then, we learned that consumer confidence as reported by the Conference Board came in with a reading of 60.6, which was well below the consensus estimate of 65.7.This was the lowest reading since November 2011. Keep in mind that the 90 to 110 range is a neutral reading for this measure. With this continued weak reading, consumer discretionary stocks should not have stretched to multiyear highs, which they did recently. Another reason for caution was the latest reading on consumer credit, which declined for the first time in almost a year. Consumer credit fell by $3.28 billion. Wall Street economists were forecasting a rise of $9.1 billion. Consumers reduced credit card debt, which is a troubling sign for the economy. Another economic warning was provided by FedEx (FDX) before the market opened Tuesday. The company reduced its fiscal-year profit forecast significantly, citing the stalling global economy. The daily chart for XLY ($47.30 vs. $44.64 on Aug. 14) is positive, but it has an overbought momentum reading (12x3x3 daily slow stochastic), and it's above its 21-day, 50-day and 200-day simple moving averages at $46.09, $44.87 and $43.22, respectively. My semiannual and annual value levels lag at $39.91 and $36.46, respectively, with annual and weekly pivots at $43.17 and $47.76, respectively, and monthly and quarterly risky levels at $49.14 and $50.12, respectively. Source: Thomson Reuters
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV