The Consumer Discretionary Select Sector SPDR ETF (NYSE: XLY) has staged a remarkable surge higher in the quarter as the year draws to a close. The ETF rocketed 26% on the quarter to bring its YTD performance to 30% as of last week’s close. To put that into context, that performance has led even the growth and allure of tech giants, with the Invesco QQQ ETF (NASDAQ: QQQ), the popular tech-focused ETF, surging almost 16% on the quarter and up 28% YTD.
A potential risk emerges as the XLY ETF surges to new highs, significantly outperforming the broader market. This raises the question: Is the sector now overbought and primed for a pullback or correction? One key metric to gauge such conditions is the Relative Strength Index (RSI). At its current level of 80.23, the XLY ETF is firmly in overbought territory, signaling heightened susceptibility to a short-term pullback. However, it’s equally crucial to examine how the sector's top players perform and to analyze specific data points influencing consumer confidence and spending, as these factors can provide deeper insights into the sector’s resilience or potential vulnerabilities.
