By Stoyan Bojinov
Stocks lost steam on Thursday after investor confidence in the markets took a hit as JPMorgan’s (NYSE:JPM) earnings missed analyst expectations, sparking a sell-off in the financials sector. The Dow Jones Industrial Average and S&P 500 both finished the day in slight red territory, while the NASDAQ inched a bit higher in anticipation of Google’s earnings results at the end of the day. The internet giant surpassed analyst estimates as profits rose by 29% from last quarter, and shares were up well over 5% in after hours trading. Gold tumbled down to $1,654 an ounce yesterday morning, although the precious metal was able to hold support and work its way higher, settling around $1,670 an ounce for the day.
Wall Street has been in a cheerful mood these past few trading sessions as euro zone worries have seemingly evaporated. Investors will look to end the week on a positive note as U.S. retail sales take center stage later today. The SPDR S&P Retail ETF (NYSEARCA:XRT) is our fund to watch for the day and analysts are expecting 0.8% growth in retail sales for the month of September, versus last month’s reading which showed no change [see XRT Holdings].
Since topping out at $56.44 a share on 7/7/2011, XRT has tumbled considerably lower, just skimming the $42.50 level. XRT appears to have established support around the $44 level, as this ETF has bounced back from this level three times now over the past two months [see Alternatives To The 20 Most Popular ETFs]. This ETF is now at a critical spot as it has closed right on its 200-day moving average (yellow line) just above $50 a share. XRT is clearly attempting to break above its 200-day moving average, and we would advise investors to wait until the fund establishes support above its moving average for two or more consecutive days before jumping in long [see XRT Charts].
click to enlarge
From a longer-term investment perspective, establishing a long position at current levels offers great upside potential. However, XRT is still considered to be in a technical downtrend and we would advise for conservative investors to hold off until the fund is back above the $50 level.
If retail sales come in better-than-expected, investor confidence in the U.S. economy will likely improve, sparking a potential rally on Wall Street. In terms of upside, XRT can possibly soar to $52 a share, at which point we would advise short-term traders to take profits. If history repeats itself however, XRT will fail to conquer the $50 a share level, as it has already done so twice already in the last two months. In terms of downside, this ETF has minor support at $48 a share, with major support coming in at the $44 level as mentioned previously. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.
Disclaimer: ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF Database. All content on ETF Database is produced independently of any advertising relationships.