Stocks around the globe staged a massive rally yesterday as the much-anticipated FOMC decision delivered on expectations. Bullish pressures prevailed as markets cheered on the Fed’s announcement of an additional round of quantitative easing; although markets got what they wanted, the announcement is really a double-edged sword as it suggests that the Fed is still worried about the health of the domestic recovery. In light of this, investors will digest a handful of consumer-centric data releases later today that could tip sentiment in either direction [see also Silver, SLV's Stealth Rally].
Our ETF to watch for the day is the State Street S&P Retail ETF (XRT, A-), which will come into focus as retail sales data hits the street at the opening bell. XRT could see an increase in trading volumes depending on investors’ reaction to the latest retail report which will offer insights into the health of the U.S. consumer; analysts are expecting for the figure to come in unchanged at 0.8% [see Consumer-Centric ETFdb Portfolio].Chart Analysis
XRT soared to new highs for 2012 yesterday as Bernanke’s announcement of QE3 lifted equities across the board; this fund rose over 1% on the day, hitting $64.83 a share and clinching gains of close to 23% year-to-date. This up-leg is quite significant from a technical perspective; XRT previously tried, and failed, to summit the $63 level back on March 27 and April 30, 2012. This time around XRT was able to soar right past previous resistance as news of QE3 delivered a much-needed fundamental catalyst [see also ETF Technical Trading FAQ].xrt
Despite its strong move to the upside, this ETF may be losing momentum when you consider trading volumes; notice how daily trading volumes have been steadily decreasing since the beginning of May while the price has crept higher. This divergence may point to a potential trend reversal in the near future, unless trading volumes pick up as the price continues to rise [see also 3 ETF Trading Tips You Are Missing].Outlook
If the latest retail sales report comes in better-than-expected, retail stocks may end the week on a very positive note; in terms of upside, XRT has no clear resistance in sight, although profit-taking pressures could emerge around the $65 mark. On the other hand, disappointing retail data could inspire a broad sell-off; in terms of downside, the first support level for XRT comes in at $63 a share. 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.