Domestic equity indexes staged an impressive comeback on Thursday as stocks climbed out of a hole in the final hours of trading. Mixed economic reports played a key part in paving the way for back-and-forth trading throughout most of yesterday. Weekly jobless claims were encouraging, although the figure ultimately missed estimates; 359,000 people filed for unemployment benefits versus the expected 345,000. U.S. GDP also came in below expectations; domestic economic growth came in at 3% versus analyst estimates of 3.2% [see also 3 ETFs For The End Of Operation Twist].
The domestic retail sector could make the headlines later today as investors gain insights into the health of the consumer. Our chart to watch for the day is the State Street SPDR S&P Retail ETF (NYSEARCA:XRT) as it may see an increase in trading volumes following the release of the latest consumer sentiment data [see also Shopping For A Retail ETF]. Analysts are expecting for consumer sentiment to come in at 75, versus the previous reading of 75.3.
Consider the chart below. XRT has been consistently trekking higher along a steep, rising level of support (see green trend line) since this ETF regained its footing above the 200-day moving average (yellow line) at the start of 2012. The uptrend in this ETF is undeniable; XRT has gained nearly 40% since bottoming out at $43.40 a share back on 8/19/2011. This ETF, which debutted in mid-2006, has been trading at all-time highs since the start of February 2012 [see also XRT Fact Sheet].
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Investors who are eager to jump into this uptrend should exercise caution as a more serious correction could follow if the price fails to hold support at the $60 level. Those with a stomach for risk are advised to establish a long position with a carefully managed stop-loss order in case selling pressures unexpectedly accelerate.
If consumer sentiment data comes in better-than-expected, a rally in the retail sector will likely follow. In terms of upside, XRT could resume its uptrend and climb back above $62 a share, although caution should be exercised as it nears its previous peak at the $63 mark. On the other hand, if selling pressures develop after a worse-than-expected consumer sentiment release, XRT may trade lower. In terms of downside, this ETF has support at the $60 level followed by support at $58 a share. 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.
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