Bullish momentum cooled off a bit on Wall Street after an explosive start to the week. Deficit woes resurfaced after Chairman Bernanke commented that the Fed does not have the tools necessary to offset the potential consequences that may plague the economy if we do drive off the “fiscal cliff.” Homebuilder stocks extended their rally from yesterday as another piece of bullish housing market data hit the street; October housing starts came in at 894,000, blowing past the 825,000 estimate [Download 101 ETF Lessons Every Financial Advisor Should Learn].
Investors will keep their attention locked onto the homefront as consumer confidence data comes out ahead of the Black Friday shopping spree. As such, the State Street SPDR S&P Retail ETF (XRT, A) will be on our radar screen as it may see an uptick in trading activity following the data release after the opening bell. Analysts are expecting for the November University of Michigan sentiment figure to come in at 84, marking a slight decline from its previous reading of 84.9 [see our Consumer Centric ETFdb Portfolio].
XRT has posted a series of lower-highs (red line) and lower-lows since recently peaking at $65.47 a share on September 14, 2011. While its price action over the last two months is far from bullish, XRT may be poised for a pop higher as it appears to be holding above a key support level; notice how this ETF has managed to bounce off the $60 level in recent sessions, similar to its reaction in early August of this year when it also held above this price level and climbed higher over the following weeks [see our ETF Technical Trading FAQ].
This ETF has also retraced down to its 200-day moving average (yellow line), which may entice buyers waiting on the sidelines; notice how XRT has a history of bouncing off this moving average as seen in late July of this year [see 5 Important ETF Lessons In Pictures].
If the latest consumer sentiment report paints a bullish outlook for retailers ahead of the holiday weekend, XRT could be in for a big rally on the day; in terms of upside, this ETF has major resistance around $64 a share. On the other hand, disappointing confidence data could create headwinds for XRT; in terms of downside, this ETF 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.