Retail Sector Faces Bearish Divergence as Key Support Beckons

I have been very clear about waiting for the “inside” sectors to reconcile their trading ranges before loading up on new equity positions.

I have been equally clear on investing in hard assets, especially now as we have even more reasons to believe that prices of necessities are not going lower anytime soon.

So, in the spirit of hump day, I would like to examine the retail sector through the lens of our Granny, .

After all, between strikes, weather, debt, geopolitics, spending and easier monetary policy-it’s her-the consumer who will tell us what’s up.

How perfect that on hump day Granny sits on the hump or smack dab in the middle of the high and wide channel I wrote about .

If we call 80.00 the high of the channel and 70 the low of the channel, what does that make 75?

Not only is 75 the midway point, but it is also the price of the key 50-day moving average. (give or take).

XRT underperforms .

Real Motion is in a bearish divergence with the red dots below the 50 and 200 DMAs.

The takeaway for hump day?

Wait until we see more evidence of the next direction.

Will Granny just sit atop the hump of the camel and hold?

Will she test the lower regions of the channel support?

Or will she rise to the occasion and take out the recent resistance?

You will know soon enough.

ETF Summary

(Pivotal means short-term bullish above that level and bearish below)

• S&P 500 (SPY) 565 pivotal support
• Russell 2000 (IWM) Range 215-225
• Dow (DIA) Another potential topping pattern? Inside day
• Nasdaq (QQQ) 485 pivotal resistance
• Regional banks (KRE) 52-55 support zone
• Semiconductors (SMH) 240 pivotal
• Transportation (IYT) 67.00 support 69 resistance
• Biotechnology (IBB) 140-142 support zone
• Retail (XRT) 75 support zone
• iShares iBoxx Hi Yd Cor Bond ETF (HYG) 79.50 support to hold for risk on