Nike: Just Sweat It

The post-earnings gap down in Nike this morning raises a few issues for a very important part of the market. While it is true that NKE is now a Dow component, it is still a major holding in the XLY, ETF for the consumer discretionary sector. 

AMZN is the top holding in the XLY, but NKE is likely a key piece of the puzzle into the spring months. NKE has seen an incredible, multi-year uptrend. And, going forward, if the weakness holds and builds steam downhill it portends poorly for bulls expecting a new leg higher. 

Moreover, on the XLY weekly chart, below, the potential for a head and shoulders top spanning roughly eight monthly can be seen, projecting the end of the bull run for the many winning consumer stocks (AMZN HD NKE SBUX, etc.). 

I am keying off $78, just above, on the XLY, to see if bears defend that area as resistance. Otherwise, the top thesis loses its luster. 

And, of course, NKE's reaction to this earnings reaction may very well provide the answer to that question.