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Why Consumer Discretionary ETFs Are on the Rise

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Weekly return

The US consumer discretionary sector saw a rise after some prominent companies released positive earnings and reported an increase in their top line numbers last week. The VanEck Vectors Retail ETF (RTH) gained the most, rising 4.5% on a weekly basis as of November 23, 2015. Similarly, all major consumer discretionary ETFs rose during the week. The Vanguard Consumer Discretionary ETF (VCR) and Fidelity Consumer Discretionary ETF (FDIS) both rose by 3.3%, whereas the SPDR S&P Retail ETF (XRT), which can be considered a proxy for the US retail sector, rose 3.6%.

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Moving averages indicate bullish crossovers

The simple moving averages show that the consumer discretionary sector ETFs have moved above their short-term and long-term moving averages. As can be seen from the above chart, the ETFs rallied last week, which helped them cross over the short-term 20-day moving average as well as the long-term 100-day moving average, indicating a rising trend in the sector.

14-day RSI rises

The 14-day RSI (relative strength index) oscillates between zero and 100 and is used to indicate trends in price movement. The 14-day RSI readings of the consumer discretionary ETFs indicate a rising trend. The 14-day RSI reading of the SPDR S&P Retail ETF (XRT) rose from 35 at the start of the week to 48.5 on November 23, 2015. The other ETFs had a similar rise in their 14-day RSI readings.

The rally in the sector can be attributed to the earnings releases of companies such as TJX Companies (TJX), Target Corporation (TGT), L Brands (LB), and Lowe’s (LOW).

In the next part of this series, we’ll explore fund flows of consumer discretionary ETFs.

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