As the market and economy cheer the rise in GDP, we can thank consumer spending, 70% of GDP; services (what consumer pay for in aid, help or information), 45% of GDP; and government spending, about 19% of GDP.
Hence, one sector to watch carefully is retail, or our Granny XRT.
The ETF XRT is still well underperforming the SPY over the course of this year. However, considering that, XRT looks ready to enter a bull phase with a golden cross. Furthermore, as measured by our Leadership indicator, XRT is slightly outperforming the SPY.
The SPY chart is signaling a mean reversion sell signal potential, but, otherwise, looks good as long as it holds 452, its July calendar range high. XRT also sits at an inflection point, as the July 6-month calendar range high is at current price levels. While yields and oil prices rise, that could hurt consumers.
How long can the “Fed will pause/pivot in 2024” sentiment give markets and consumers hope if yields and oil both remain high? For now, XRT shows more optimism than not. We will look at that chart carefully this month.
Oil is over $81 a barrel. We know if that continues, CPI, PPI, PCE–all of it will go up during the next round of economic releases.That should curtail “Fed will pause” enthusiasm even if they do pause. And clearly, high rates and high energy prices are bad for consumers.
Where should we look then to see what might happen next?
Our Big View has been useful in helping us see the various risk factors. The key ones we look at are:
How the SPY is doing versus the long bonds TLT.How the TLT is doing versus the junk bonds HYG.How gold is doing versus the SPY.How WOOD is doing versus gold and how utilities are doing versus the SPY.
All risk factors right now say risk on. Hopefully that continues to be the case. Should that change, we will be right on top of it to share with you.
For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
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Mish in the Media
Mish talks about opportunities related to EVs in this video from Business First AM.
Mish and Jared go over oil and what might happen with small caps and regional banks in this appearance on Yahoo! Finance.
This has been a very heavy week with the Fed meeting, tons of earnings, and, not to mention, all of the geopolitical issues around the world. Something that Mish has been thinking a lot about is store houses for raw materials, the places that actually hold every kind of raw material from mining, commodity trading houses etc. Mish dives into the stocks she’s looking at on the Wednesday, July 26 edition of StockCharts TV’s Your Daily Five.
Mish looks at a selection of popular instruments and outlines their possible direction of travel in this video from CMC Markets.
In this episode of The Breakfast Show from Money FM 89.3 Singapore, Mish makes sense of the recent resilience and worrisome trends in the market, delving on the various factors driving consumer confidence in the face of rising rates and inflation, the impact of A.I.-driven companies, and the ongoing geopolitical risks on commodities and equities.
Mish talks PCE inflation picks in this video from Business First AM.
Coming Up:
August 3: TD Ameritrade Macro Show
August 10: The Final Bar on StockCharts TV
October 29-31: The Money Show
ETF Summary
S&P 500 (SPY): 452 July calendar range high now support.Russell 2000 (IWM): 193 is the 23-month holy grail.Dow (DIA): 35,000 support.Nasdaq (QQQ): 384 pivotal based on the calendar range.Regional Banks (KRE): Consolidating over its July calendar highs is positive.Semiconductors (SMH): Holds here okay; needs to clear 161, under 147 trouble.Transportation (IYT): 240 is the key underlying area of support.Biotechnology (IBB): 128 support now to hold; would like to see it clear 130.Retail (XRT): 67.40 the calendar range and pivotal.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education