Last week, we asked, “Can the Retail ETF 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 the second half of the year.
- 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-to-8-year business cycle low as measured by the 80-month moving average held. Many retail and value names did indeed present 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, well, you’re probably not reading this Daily. Or you are reading this and remain on the fence about the validity of 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. We’ve also noted that SPX 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
The debt ceiling passing could be inflationary as the overall debt is larger, while government spending continues. The dollar is strong, but BRICS grows stronger. China’s demands for goods also grows stronger. OPEC+ meets this weekend, while oil prices also held key support and are now rising.
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 MA 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 that 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.
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.
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June 5: Business First AM
June 6: CMC Markets and Wolf Financial Spaces
June 8: Wolf Financial Spaces
June 22: Forex Premarket Show with Dale Pinkert
June 23: Your Daily Five on StockCharts TV
- 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.
Director of Trading Research and Education