Market volatility is showing up in fits and starts and some important sectors are underperforming.
While Tuesday I wrote about the strength of junk bonds in the face of risk off ratios (TLT treasury bonds vs. SPY S&P 500, HYG high yield bonds), today, I am still quite concerned about the Retail Sector ETF (NYSEARCA: XRT), or the consumer sector.
Investors have hopes that Nvidia earnings can help the market survive.
But let us look deeper into how Nvidia reflects (or not) the consumer.
Are consumers upgrading computers? Are they buying AI assistance?
Considering all the fears of higher food, auto and service prices, we still maintain it is not only what folks buy, but how much they buy that will impact the economy and the market most.
Plus, tariffs are surely spooking consumers as well.
This Friday (for 24 hours), there is a call for a nationwide economic blackout.
While the nationwide economic blackout applies to all discretionary spending, the organizers are targeting specific retailers.
- Amazon
- Walmart
- Best Buy
But participants are also asked to refrain from spending money on fast food or gas.
“If we disrupt the economy for just ONE day, it sends a powerful message.” One could say it is the direct opposite of Black Friday.
One day in the US concerning companies might not mean that much as global shoppers are not involved.
Best Buy has stores in Mexico and Canada. Tariffs will have an impact.
However, if this is the start of a trend, bigger issues will pop up.
Ultimately, the chart of the Retail Sector ETF (XRT) tells the story.
The daily chart confirms the Distribution phase.
The bounce from the big sell0ff last Friday has been unimpressive.
On the weekly chart (not shown) the 200-week moving average sits at 74.00. However, the slope is negative
After that, the next big support is at the 23-month moving average at 71.50.
So, while there is support on the way down, the bigger picture is that momentum has continued to grow more bearish and the underperformance to the SPY is notable.
Can Nvidia save the consumer?
Only if XRT can rally back over 77 would we consider that this correction is over.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
