BTIG waves the caution flag around the consumer staples sector

BTIG’s Jonathan Krinsky has waved a caution flag on the Consumer Staples sector, saying in a recent investor note that the segment appears to be extremely overbought.

“We reiterate our caution on the Consumer Staples sector here. The Consumer Staples ETF (NYSEARCA:XLP) has been up 10 of the last 11 weeks, with the one down week losing just -0.14%. Weekly RSI is pushing 79, the highest in a decade,” Krinsky said on Monday.

The analyst went on to add that the equal-weight staples ETF (NYSEARCA:RSPS) still trades below its March 28 year-to-date peak. “As a result, the XLP/RSPS ratio is now 6.7% above its 200 DMA, the widest spread since 2008.”

The investment firm further highlighted that the cap-weighted XLP has become increasingly more dependent on a couple of big names, including the likes of Walmart (WMT) which BTIG noted is now 28% above its 200 DMA.

For reference, XLP comprises 39 total holdings, but the fund’s top five holdings together represent more than half, 54.8% to be exact, of the entire exchange-traded fund’s portfolio allocation. See below XLP’s top five largest holdings and allocations:

• Procter & Gamble (PG): 14.21% allocation.
• Costco Wholesale Corp (COST): 14.05% allocation.
• Walmart (WMT): 11.91% allocation.
• Coca-Cola (KO): 9.58% allocation.
• Philip Morris International (PM): 5.05% allocation.

Furthermore, for investors looking to further keep a pulse on the Consumer Staple sector of the economy, they can look to further analyze other exchange-traded funds within the space as well. See a grouping of funds worth noting below:

Consumer Staples ETFs: (VDC), (IYK), (FSTA), (KXI), (FXG), (PBJ), (PSL), and (PSCC).