The Sector to Watch for Clues

Advertisement

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

After early morning weakness on Friday, U.S.stocks managed to find support and rallied for the rest of the day. The situation in Europe remains unstable even as Greek politicians are nearing an agreement on a potential unity government.

All sectors in the S&P 500 fell last week, led by financials, which dropped nearly 5.5%. The S&P 500 itself slipped 2.5% on the week, which resulted in the first weekly decline since late September.

I have often discussed the resistance areas on major charts recently, especially on the S&P 500. Another way to look at the S&P 500’s important crossroads is by noting the upward sloping line that served as support for much of 2011, and now looks to be acting as resistance. The line currently comes in just around the 1,300 mark and coincides with the 200-day simple moving average.

When the line acted as support earlier this year it also served as the neckline of the head-and-shoulders pattern that hit its target in early August. Note the three circles on the chart below denoting the head in the middle with the shoulders to the left and right of it.

I remain of the opinion that it is unlikely for the S&P 500, as well as the other broaderU.S.equity indices, to rally much beyond the highs from Oct. 27 before turning lower. It would, however, be possible for stocks to swing back and forth at current elevated levels for a while before ultimately resuming their downtrend. From a trading point of view, the market remains best played in shorter time frames with longer-term investment buckets sitting in cash.

SPX Chart
Click to Enlarge

Out of all the majorU.S.equity indices, the Russell 2000 still holds its technical patterns of resistance the best. So I again point out the horizontal resistance near 770, which coincides with the 200-day moving average as well as an important Fibonacci retracement level.

RUT Chart
Click to Enlarge

One sector I will keep a close eye on in coming weeks is retail stocks. The group as measured by the SPDR S&P Retail ETF (NYSE:XRT) is up roughly 9% for the year, and a relative outperformer. Should those stocks start to lose upside momentum and possibly fall below the 200-day moving average on the XRT, it could serve as a clue that the broader market will turn lower.

XRT Chart
Click to Enlarge


Article printed from InvestorPlace Media, https://investorplace.com/2011/11/daily-stock-market-news-watch-retail-stocks-for-clues/.

©2024 InvestorPlace Media, LLC