The bears continued their dominance on Wall Street as a strong start to the day was countered with a mid-day sell-off, erasing all of the gains and then some. “Fiscal Cliff” woes permeated headlines again and will likely remain at the forefront until policymakers in Washington D.C. hammer out a concrete plan for tackling our massive debt burden. Overseas, European investors’ showed little enthusiasm over the latest Greek “band aid,” referring to the most recent agreement by finance ministers to postpone the nation’s funding deal for November 20 [see also Free 7 Simple & Cheap All-ETF Portfolios].
With U.S. retail sales expected to hit the street later today, our spotlight will focus in on the State Street SPDR S&P Retail ETF (XRT, A-), which may see an increase in trading volumes depending on how markets digest the news. Analysts are expecting October retail sales to have contracted by 0.1%, marking a modest decrease from the previous reading, which showed growth of 1.1% [see Consumer Centric ETFdb Portfolio].Chart Analysis
This ETF is currently in a “sweet spot,” as it appears to be holding support at its 200-day moving average (yellow line). Since recently peaking at $65.47 a share on September 14, 2012, XRT has had three failed attempts at stabilizing above $64 a share; this ETF backed away from resistance on October 5 and most recently again on November 2, 2012, while at the same time posting lower-lows. Although its recent price action is far from bullish, XRT could make for an appealing buy at current levels given its longer-term uptrend (blue line) and history of bouncing off its 200-day moving average [see 101 ETF Lessons Every Financial Advisor Should Learn].
For those eager to tap into the attractive upside potential, setting a stop-loss around $60 a share is advisable as selling pressures may accelerate if this ETF fails to bounce off the 200-day moving average as many are anticipating [see also 3 ETF Trading Tips You Are Missing].Outlook
If the latest retail sales data comes in better than expected, retail stocks could carry the broad market higher; in terms of upside, this ETF has major resistance around the $64 level. On the other hand, a disappointing data release may sink this sector further; in terms of downside, XRT has major support around $60 a share followed by the $56 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.