Investors returned to the street in a buying mood this week ahead of the highly anticipated FOMC meeting coming up in September. Bullish pressures kicked off trading on Monday morning as investors weighted the possibility of the Fed delaying tapering after durable goods data missed the mark; July’s new orders figure contracted by 7.3%, marking a worse-than-expected deterioration from last month’s reading of 3.9% [see also Monetary Policy Around The Globe: Currency ETF Edition].
Our chart to watch for today is the State Street Consumer Discretionary Select Sector SPDR (XLY, A) which could experience volatile trading as investors reat to the latest consumer confidence data. Analysts are expecting for the confidence figure to come in at 78, which would mark a slight deterioration from last month’s reading of 80.3.
Consider XLY’s one-year daily performance chart below. This ETF has enjoyed stellar gains YTD, managing to climb higher along a steadily rising support line since December of 2012; notice how XLY has managed to bounce off its 50-day moving average (blue line) after virtually every single pullback since the start of the year. Given this longer-term price pattern at hand, XLY appears to be in a sweet spot at the moment as it builds support along the 50-day SMA [see The Complete Visual History Of SPY].
XLY appears to be building solid support right above its previous resistance level around $58 a share as it gears up for a rebound; although a longer-term bull trend is in progress, selling pressures could still intensify further as XLY has previously dipped below its 50-day SMA as seen in late June of this year [see 7 Rules ETF Day Traders Must Know].
Upbeat consumer confidence data can serve as the much-needed fundamental catalyst necessary to propel XLY off its 50-day moving average; in terms of upside, this ETF has major resistance around $60 a share. On the other hand, worrisome confidence data could create headwinds for discretionary stocks; in terms of downside, this ETF has immediate support at $58 a share followed by the $54 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.