Major equity indexes endured a tough trading session as bullish pressures prevailed on Wall Street through the closing bell. Stocks popped at the open after much better-than-expected weekly jobless claims data gave investors plenty to cheer about; nonetheless, looming election jitters at home coupled with big-bank earnings on tap were enough to welcome profit-taking pressures [see 101 ETF Lessons Every Financial Advisor Should Learn].
Investors will keep an eye on the homefront today as the latest consumer confidence report is expected to hit the street after the opening bell. As such, our ETF to watch for the day is State Street Consumer Discretionary Select Sector SPDR (XLY, A), which may see an increase in trading activity following the University of Michigan Confidence report; analysts are expecting for this figure to come in at 78, marking a minimal decline from the previous reading of 78.3 [see also Platinum/Gold Ratio Suggests Economic Slowdown].
XLY appears to have recently formed a crude double-top pattern when considering its daily chart below; notice how this ETF failed to summit $48 a share on September 14 and later again on October 5, 2012. Bullish momentum appears to be leaving this ETF as shares may stumble back into their range-bound trading channel (blue lines), which persisted throughout most of the summer months. Traders should note that the $45.50 level (red line), which served as resistance prior to September, will now act as immediate support for XLY if profit-taking pressures persist over the coming days [see Free 7 Simple & Cheap All-ETF Portfolios].
A break below $46 a share may welcome accelerating selling pressures as traders will look to buy in only after XLY reestablishes definitive support [see also 3 ETF Trading Tips You Are Missing].
Better-than-expected consumer confidence can inspire a rally on Wall Street; in terms of upside, XLY has major resistance at $48 a share. On the other hand, a pessimistic reaction to the latest report or shaky earnings results may very well keep the doors open for the bears; in terms of downside, this ETF has support at $45.50 a share followed by the $44 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Follow me on Twitter @SBojinov
Disclosure: No positions at time of writing.