Stoyan Bojinov: With no shortage of worries spilling over from the Euro zone, increasing uncertainty on Wall Street turned into a dismal multi-day sell-off to start the week. The political situation in Greece remains turbulent as the debate whether or not to implement austerity continues to wage between opposing parties. Economic data releases on the home front have been sparse, although surprisingly positive, however, investors have largely ignored domestic headlines given the more frighteing developments taking place overseas [see also 5 ETFs For A China Bank Bubble].

For those that are taking note of domestic economic news, the University of Michigan Consumer Sentiment Index release later today could draw some attention depending on the results. As such, our ETF to watch for the day is the State Street SPDR S&P Retail ETF (NYSEARCA:XRT) which may see an increase in trading volumes as retail stocks react to the latest consumer sentiment data. Analysts are expecting for the figure to come in at 76 versus the previous reading of 76.4 [see also Shopping For A Retail ETF].

Chart Analysis

XRT appears to be moving within a fairly well-defined trading range since the end of March of this year. Since peaking at $63.04 a share on 3/27/2012, this ETF has been oscilalting between the $58 and $63 levels. Notice how it recently tried, and failed, to reach a new high only to encounter major resistance around $63 a share on 4/30/2012. Likewise, this ETF has done a nice job of holding support above $58 a share; notice how XRT has bounced off above the $58.50 level on 4/10, 4/24, and most recently on 5/8/2012.

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Given this observable trading range, it appears that XRT is poised to climb higher in the coming sessions if it is able to regain momentum as it has previously done so. It’s also worth noting the high trading volume on 5/8/2012, which helps to confirm support above $58 a share [see also 5 Simple ETF Trading Tips].

Outlook

If the latest consumer sentiment data paints an optimistic outlook, the domestic retail sector could rally higher. In terms of upside, XRT could soar as high as $62 a share, although caution should be exercised as it nears previous resistance around the $63 level. On the other hand, resurfacing Euro zone debt woes or a negative report could just as easily drag this ETF lower. In terms of downside, the next level of major support for this ETF comes in at around $58.50 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Written By Stoyan Bojinov From ETF Database

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NYSE:XRT