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Options Trading News

January 13, 2011  Thu 8:33 AM CT

XLY: SEE CHART GET CHAIN FIND STRATEGIES

As we head into the thick of earnings season next week, getting a handle on what sectors have helped--or hurt--the broader market is a good way to prepare. In our chart for today, a one-year comparison of the S&P 500 (teal) and the Consumer Discretionary Select Sector SPDR (magenta), it's clear to see how important the sector has been.

Although consumer discretionary is just a bit more than 10 percent of the weight of the S&P 500, it has outperformed the broader index by 2 to 1. As can be seen in September, when the sector was at the zero line, the S&P 500 was in negative territory.

In just four months, the sector rose 24 percent from that zero line. The S&P rose by 20 percent from its lows in the same period.

SPX vs. XLY

Within the consumer discretionary sector, just a few heavily weighted stocks were the biggest contributors to the gains. Two to watch are Ford, which has risen more than 60 percent since September, and Amazon, which has risen by nearly 50 percent in the same interval.

Ford has a 5.6 percent weight in the sector; Amazon is next, at 5.35 percent.Walt Disney and McDonald's, which are more heavily weighted, actually underperformed on a relative basis.

The four names together compose 23.5 percent of the sector's weight. So how these four names react to earnings will have a great deal to do with how well the sector does--and, in turn, the broader index.

(Chart courtesy of tradeMONSTER)

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