XLY sits on an ascending trendline and a critical support zone from here to 104-105; a further drop is a risk. Versus XLP, XLY is at new 2026 intraday lows, challenging its March 2025 low, a bearish signal; intraday liquidity has not yet returned to discretionary stocks.

So let's take a look at the XLY index. First, the absolute graph only. This is XLY for luxury consumer goods over the past fifteen years, and just look at the last six years or so.

The bottom since the pandemic, the bottom at the end of the cyclical bear market of 2022, the bottom in the very short cyclical bear market at the beginning of 2025, and then where we are now.

We are literally sitting right on this trend line . I think luxury goods need to prove their worth from here. We must be extremely careful about falling any further . The recent XLY lows were around 104 and 105, and we have an ascending channel line that is testing our current level exactly.

Therefore, I believe that the area from here to 104 or 105 is a critical support zone for the XLY index. We don't want to see consumer discretionary stocks fall any further.

Here is a graph showing how XLY performs against XLP in two different ways. At the top of this chart, the top panel, price gaps are ignored . Therefore, I maintain a custom indicator on StockCharts , and I track the performance of XLY vs. XLP from the opening bell to the closing bell.

I completely ignore what happened between yesterday's closing and today's opening. Therefore, if we have a large downward gap, it appears in the middle panel . This panel includes gaps.

The one above ignores the gaps. I have often found that you start to see intraday selling early in the day when the market is weak; Price gaps often involve manipulation, but you cannot manipulate the selling that occurs during trading.

For this reason, I believe this graph is very important. If you look back to April 2025, when the S&P was at its lowest point, look at what the consumer discretionary stock market was doing during the day.

Its performance far outperformed that of core consumer sector stocks. During the day, capital was moving strongly into optional shares. We did not notice this if we included the gaps because that group continued with downward gaps.

The feeling was bad in the morning, but we were seeing a rebound afterward. So , when we start to see early sell-offs during the day, I think that's a bearish signal, all other things being equal .

Of course, there are other things in the market that we need to take into account, but I don't like it when optional sector stocks perform poorly. Look where we are now. Based on daily trading, the XLY vs. XLP index is recording new lows for 2026.

This is not a good indicator. We are now challenging the low we recorded in March 2025 on a daily trading basis. This is something that needs to change. Therefore, we not only need to maintain this channel line or trend line, but we need to see liquidity move back into the option stocks during the day, and that is something we have not seen yet.