Choppy trading was the theme on Wall Street yesterday as statements from the Federal Reserve coupled with looming uncertainty over the “fiscal cliff” made way for speculators. Stocks kicked off the day with a rally only to give in to profit-taking pressures after Chairman Bernanke announced the extension of the ongoing bond-buying program; the twist that spooked some was the new stipulation, which set a 6.5% threshold for the unemployment rate. The Chairman also put pressure on Congress by stating that the Fed doesn’t have the necessary tools to offset the effect of the fiscal cliff [see 101 High Yielding ETFs For Every Dividend Investor].
Investors will keep their attention fixed on the homefront later day as November retail sales data hits the street at the opening bell. As such, the State Street S&P Retail ETF (XRT, A-) will be on our radar screen as it may experience volatile trading following the latest report; analysts are expecting the November retail sales figure to have expanded by 0.4%, which would mark a healthy improvement from the previous reading which showed a contraction of 0.3% [see our Consumer Centric ETFdb Portfolio].
Chart Analysis
XRT been trading sideways with a downward bias since recently peaking at $65.47 a share on September 14, 2012. Although XRT’s price action over the past two months has been frustrating, it is encouraging to see that this ETF managed to rebound off its 200-day moving average (yellow line) in mid-November. Adding to the list of bullish evidence, XRT has also been able to stay afloat above $62 a share as it appears to be building a rising level of support [see ETF Technical Trading FAQ].
Click to Enlarge
While it is encouraging to see XRT holdings its ground, investors should be aware of the prevailing bearish price pattern at hand; since peaking in mid-September, this ETF has posted a series of lower-highs (red line) and lower-lows (blue line), which sends a mixed signal for those looking to enter at current levels [Download 101 ETF Lessons Every Financial Advisor Should Learn].
Outlook
If the latest retail sales data falls short of expectations, equity market could face strenuous headwinds; in terms of downside, XRT has immediate support at $62 a share followed by the $60 level. On the other hand, upbeat sales can easily inspire a broad-market rally; in terms of upside, this ETF has major resistance around $64 a share. 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.
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