This divergence may spell trouble for 2015's best sector

Consumer discretionary stocks have been by far the best performing group in the S&P 500 this year. The sector is up more than 10 percent year to date, compared to the broader index which has dipped into the red for 2015.

However, one technician is watching a divergence in the charts that could mean the outperformance won't last much longer.

"It's been a tale of two charts here," Rich Ross of Evercore ISI said Thursday. "[Consumer discretionary is] up 11 percent year to date, but that doesn't tell the whole story."

Looking at the ETF that tracks consumer discretionary stocks (XLY), Ross said the capitalization-weighted fund has been carried higher by its top holdings Amazon, Walt Disney and Home Depot, which are up 113 percent, 17 percent and 26 percent for the year, respectively.

But problems in the retail space could actually drag down the broader sector heading into 2016, Ross said. The equal-weighted ETF that solely tracks retail stocks (XRT) has fallen more than 7 percent this year.

"More broadly speaking, retail has some issues here, and you're asking a lot of a very small group of stocks to continue to carry this space. I don't think it will," Ross said on CNBC's "Trading Nation."

From a technical standpoint, Ross also pointed out that XLY returned back above its 100-day moving average, while XRT has been unable to break through its moving average for several months.

Going into 2016, retail will likely remain under pressure from warmer weather affecting sales, as well as a potential increase in interest rates, Ross said.

Larry McDonald, head of U.S. macro strategy at Societe Generale, said a rise in crude oil prices could also hit retail stocks in the new year.

"Over the next 52 weeks we have a view of mid-50s in crude for next year," McDonald said Thursday on "Trading Nation." "That's a headwind for the consumer, so over the next year although its a sector that had a good 2015, I don't see as good of a 2016."

Want to be a part of the Trading Nation? If you'd like to call in to our live Wednesday show, email your name, number and a question to


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more