Economic sentiments are evenly poised at the moment with the fourth quarter GDP coming in at -0.1% followed by positive looking trade data from two of the world’s leading economies, namely U.S. and China. Turning closer to home, investors now have retail sales data to look forward to on Wednesday, which could give the space more direction going forward (see Time to Buy Retail ETFs?).
Looking at it from an ETF point of view the SPDR S&P Retail ETF (XRT - ETF report) will be in focus this week. And judging by its charts, it could post a positive picture before the upcoming release.
After bottoming out from its lows in the second quarter of last fiscal year, the Retail ETF XRT has been quite impressive. Nevertheless, a look at the short term price chart of the ETF reveals that it has already witnessed a consolidation during the last two months of the last fiscal year.
This characteristic of XRT was very different from most of its counterparts, which were facing a tremendous amount of volatility following the fiscal cliff sell off and the rally thereafter. During this time, XRT witnessed frustrating range bound trading, particularly between the $60 to $64 trading channel (read 3 Overlooked Ways to Target Consumers with ETFs).
However, what followed thereafter was an excellent reward for patience. Investors who held on to XRT did not see much action (neither upside or downside). This was particularly because the sell off and the subsequent rally mostly affected dividend players like utilities, MLPs, REITs etc. Nevertheless, the somewhat defensive XRT held its ground.
Finally on the verge of positive looking Retail Sales Data in mid-January, XRT broke out of its $64 resistance level. It then confirmed the breakout was an above average trading volume (breakout encircled).
Not only has this helped the ETF to break the range bound trading action but also injected strength into the ETF. Also, the breakout has certainly helped XRT to carry the much needed momentum forward (read 5 Sector ETFs Surging to Start 2013).
It is quite evident that the ETF has come out of its consolidation mode and started showing bullish signs. The ETF has very recently entered an upward rising trading channel making higher highs and higher lows. While this is a very positive sign for XRT investors, a sour looking Retail Sales data can surely spoil the party (see Emerging Market ETFs to Soar in 2013?).
However, the downside seems to be floored within a range of $66.5-$60 as the ETF had seen some consolidation between these levels. This is also the immediate support level for XRT.
Nevertheless, a positive Retail Sales data will surely be vital for the further upmove of the ETF. Also, the trend is surely on the positive side for the Retail ETF, as it is trading above its key moving average lines, so XRT’s run could certainly continue.
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