Soft Landing? Retail Sector Gets Up and Boogies
Michele Schneider | Jun 05, 2023 02:41AM ET
Last week we asked, “Can the Retail ETF (NYSE:XRT) hold here?”
We wrote that the Consumer Sector ETF had some words for you.
To summarize:
- The test of the 80-month MA (green and price 56.24) on the last day of the month of May is mad interesting.
- Do not assume it will fail until it does. And even if it fails that MA-June has 30 days before we can determine what happens in the year's second half.
- XRT could just as easily hold that level, offering a very low risk/reward trade or, more importantly, a relief for the rest of the Economic Modern Family and market.
So here we are in June.
Granny XRT burned those that assumed she would fail.
The 6–8-year business cycle low, as measured by the 80-month moving average, held.
Many retail and value names presented traders with a low-risk entry AND relief for the Economic Modern Family.
If you are still in the camp of not believing charts are useful, you’re probably not reading this Daily.
Or you are reading this and remain on the fence about the validity of the technical analysis.
Even the biggest skeptics must admit that this clutch hold of the 80-month moving average is impressive and an important lesson for trading decisions.
The market got a pass for now. Yay.
What’s next on the wall of worry?
Granny Retail has more work to do to prove she is back in the game. On the monthly chart, 60.00 is a good place to watch for XRT to clear or not.
Looking ahead elsewhere, we have explored the idea that NASDAQ 100 can make it to 3800.
Also, S&P 500 can make it to 4400, and the Russell 2000 can make it to 1950.
But that would be a top because…..
Inflation will come back for a second round.
Here’s why.
- Debt ceiling passing could be inflationary as the overall debt is larger while government spending continues.
- The dollar is strong, but BRICS is growing stronger.
- China’s demand for goods also grows stronger.
- The FED could “skip” or pause in June while yields are falling on their own. Let’s not forget that the regional bank crisis was averted with monetary loosening.
- Precious metals remain relatively strong as they are above the 23-month moving or in an expanded 2-year business cycle.
- Mother Nature wreaks havoc as the latest news is the Panama Canal’s waterways are so low, ships are carrying less weight, and the cost to ship goods is rising. On that note, hurricane season has begun.
- Russia is once again threatening to pull back on Ukrainian exports of agriculturals.
Get The News You Want
The point is this.
In our prediction of stagflation, this rally in equities is not unexpected. The market will test the top of the trading ranges.
Nonetheless, we do not expect deflation, as so many analysts have mentioned.
We expect that the 25% decline in the CRB will reverse course as demand rises while supply chain issues have not fully resolved.
Regardless, what a fun ride and a very interesting year.
Stay tuned.
h2 ETF Summary/h2- S&P 500 (SPY) August 2022 high 431.73-and of course 420 now key
- Russell 2000 (IWM) Cleared 180-now must hold while still miles from its 23-month MA 193
- Dow (DIA) Back above its 23-month MA making 337 pivotal
- Nasdaq (QQQ) 370 resistance 350 now closest support
- Regional banks (KRE) Right up to that 42.00 critical level
- Semiconductors (SMH) Closed Fri red. Reversal pattern top-A drop near 138-140 would be a decent correction
- Transportation (IYT) Highest weekly close since early March-good sign if holds 230 level
- Biotechnology (IBB) 121-135 range
- Retail (XRT) 60 key now as is 56.25
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.