Discretionary ETF (XLY) Resumes Uptrend After Upbeat Confidence Data

by on May 29, 2013 | ETFs Mentioned:

The bulls remain in the driver’s seat as made apparent by last week’s price action. Profit-taking pressures came quick and hard after markets got a whiff of the Fed hinting that it may end bond-repurchases sooner if deemed necessary; however, bargain buyers returned on Tuesday morning following the long weekend, putting major equity indexes back on track. With all eyes on the potential Fed policy change, investors will pay close attention to upcoming economic reports as very upbeat data releases over the coming weeks could prompt policymakers to scale back on stimulus measures [see also S&P 500 Visual History].

U.S. Consumer Sentiment Soars 

The latest Consumer Confidence Index, compiled by The Conference Board Inc., came in well above analysts’ expectation; as expected, buying pressures permeated the marketplace as investors took note of the much needed confidence following last week’s brief, but steep, correction on Wall Street. The latest consumer confidence reading came in at 76.2, marking a noticeable jump from last month’s figure of 68 while also managing to surpass analysts’ estimate of 72.3:

The latest confidence data suggests that consumers are much more optimistic about the economy, as the index climbed to a five-year high after posting solid back-to-back improvements in the months previous. It was reported that consumers grew more confident thanks to an upbeat economic outlook along with improving job prospects [see also 5 ETFs To Buy Before The Fed Cuts QE].

Consumer Discretionary ETF Performance Recap

Amid the ongoing bull run, Consumer Discretioanry ETFs are near the head of the pack as improving growth prospects have bolstered the outlook for many cyclical industries. Consider the year-to-date performance of the largest ETF covering this sector, the Consumer Discretionary Select Sector SPDR (XLY, A), versus the broad market as represented by the SPDR S&P 500 (SPY, A):

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XLY has managed to return just about 20% thus far on the year, while the broad equity market has just barely lagged behind. From a technical perspective, XLY remains in a steep uptrend with every pullback offering a buying opportunity; note that immediate support lies at $56 a share along with near-term resistance at the $58 mark.

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Disclosure: No positions at time of writing.