Bearish pressures took hold of Wall Street on Monday after leading microchip manufacturer, Intel, cut its revenue forecast while Moody’s rating agency said it would have to review the rating on all Euro zone member nations. Last Friday’s summit in Brussels proved to be a pivotal step in restoring investors’ confidence, although Moody’s noted that European policymakers are only taking incremental steps, rather than presenting a more decisive, comprehensive solution to combat the pressing issues. Ongoing worries in Europe continue to weigh down on the global economic outlook, which sparked a wave of selling across commodities [see ETF Insider: Stay On The Defense]. Gold and oil prices plunged, shedding 2.7% and 1.5% respectively on the day.
Investors on Wall Street will look to regain some holiday cheer as U.S. retail sales figures for the month of November are slated to come out before the opening bell later today. This economic data release may spark increased trading in the ultra-popular State Street SPDR S&P Retail ETF (XRT) as investors digest the latest round of data, gaining insights about the health of the economic recovery at home [see Shopping For A Retail ETF]. XRT is our ETF to watch for the day and analysts are expecting for retail sales growth to come in at 0.6%, versus the previous reading of 0.5%.
The retail segment of the U.S. economy has been amongst one of the strongest performing sectors as consumers at home are faring much better than many have come to expect. Retail sales over the last few months have been predominantly better-than-expected, showcasing that economic recovery is in fact taking root. XRT’s price performance has nicely reflected the positive fundamental developments in the U.S. retail sector, seeing as how this ETF is back above its 200-day moving average (yellow line) since the recent drama, starting with the U.S. credit downgrade in August, unfolded [see November ETF Stats: Small Step Back].
In fact, XRT has been establishing a rising level of support, making higher-highs and higher-low, since bottoming out at $43.50 a share on 8/19/2011 [see XRT Returns].
If retail sales come in better-than-expected, investors may find themselves in a buying frenzy, in anticipation of more gains to come in the equity market as 2011 draws to a close [see Ten Unexpected Observations On YTD ETF Returns]. Likewise, solid fundamental data could help pave the way higher for XRT; in terms of upside, this ETF may attempt to summit the $54 mark, although investors should note that there is significant resistance at this price level. On the other hand, if retail sales miss analyst expectations or Euro zone woes take center stage, XRT could encounter selling pressures. In terms of downside, this ETF has support at $52 a share, while the next level of support comes in at $50 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.