Equity markets kicked off the week with a sideways grind as looming corporate earnings and economic data releases later in the week paved the way for choppy trading. Another reason for the fairly uneventful start to the trading week was Ben Bernanke’s speech at the University of Michigan; the Fed Chairman noted that significant inflation is unlikely to arise from the current bond-buying program and went on to to add that raising interest rates prematurely can have a truly devastating impact on the recovery efforts thus far [see Free 7 Simple & Cheap All-ETF Portfolios].
After a sparse front last week, economic data releases will once again make a comeback on Wall Street. Investors will kick off the week with retail sales data, which is expected to come out later today. As such, the ultra-popular State Street SPDR S&P Retail ETF (XRT, A) could experience volatile trading on the day as markets digest the latest insights into the health of the domestic consumer. Analysts are expecting for December’s sales figure to come in at 0.2%, versus the previous reading of 0.3% [see Consumer Centric ETFdb Portfolio].
XRT has traded sideways since the start of the year, lagging behind several other sector ETFs like XLF and XLB, which are continuing their bull-run higher. Although this ETF is trading above its 200-day moving average (yellow line), entering into a long position at current levels is a bit speculative given the technical headwinds at hand; first and foremost, XRT has failed to summit $64 a share (red line) since September of 2012. Second, although this ETF has rebounded off the $60 level this time around, it has also managed to post lower-lows since peaking at $65.47 a share, which suggests that further downside remains a possibility [see 101 ETF Lessons Every Financial Advisor Should Learn].
One bullish piece of evidence is the fact that XRT appears to be establishing a rising level of support when considering that it bottomed out at $59.58 a share on November 15, 2012 versus $60.10 a share on December 27, 2012 [see ETF Technical Trading FAQ].
Better-than-expected retail sales data can re-ignite bullish momentum in XRT; in terms of upside, this ETF must first clear major resistance at the $64 level. On the other hand, a disappointing release may inspire heavy profit-taking pressures; in terms of downside, XRT has immediate resistance around $62 a share followed by the $60 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.