Contrary to what most might have expected...
The XRT ETF, AKA "Granny Retail," quietly closed at recovery highs on Friday.
Then, as we forewarned in yesterday's edition of Mish's Daily, XRT broke out today in a big way.
As you can see in the chart below, it decisively rose 3.6% to 69.32 past solid resistance. If it can hold these levels this week, that would be a very bullish sign for the overall market.
If you use our Real Motion indicator, also note the initial bullish reading that occurred at the July Calendar Range low and the major bullish divergence pattern on the late July retracement suggesting the resumption of the up move would breakout.
While the technology sector has been one of the strongest performers during this earnings season, it lagged behind Granny retail today.
The (QQQs) were down -0.32% and Semiconductors (SMH) down a whopping negative 1.73% as two proxies for tech and our two trusted members of Mish's Modern Family.
In addition, the market has shown true strength in recent weeks, with improving numbers of stocks breaking out to new highs.
With Granny Retail taking the lead today, the rally may have further to run if she decides to become a new sector leader, and…
As we mentioned in yesterday's Mish's Daily, if the CPI report on Wednesday doesn't upset the uptrend, there's support for it if you are listening to the market.
Today, a more comprehensive range of retail firms participated in the broader retail market rally and XRT has broken out of a big base. Only time will tell, but the current signs encourage those bullish on the market.
However, if it fails, it could signal that this rally is running out of steam.
Technology
Technology earnings have been a significant driver of the market's rally since mid-June.
S&P 500 technology stocks are, on average up more than 10% since the market's low, and many of the largest companies in the sector reported better than expected earnings. These earnings have helped to offset concerns about mixed financial headlines.
While no single market indicator is perfect, the "Modern Family" provides a helpful way to assess where money is flowing in the market. The family is comprised of one market index (the Russell 2000) and five sectors and groups.
The point is that Mish's "family" perfectly illustrates just how the dance between the bears and the bulls endures. By following the family closely, you can better understand where the market is headed and how to position yourself for success.
Today's Results
XRT up 3.6%,
IWM up 1.06%,
IBB up 0.45%,
DIA up 0.14%,
KRE up 0.05%,
IYT up 0.01%,
QQQ down -0.32%, and
SMH down -1.73%,
Though the most recent jobs report showed much better-than-expected job growth numbers, this shouldn't be taken as the only sign that the economy is doing better. Retail participation is another crucial metric for the economy's strength.
For a longer-term perspective, look at the chart below. You'll see that XRT's base and the breakout is occurring at the 200-week moving average.
It's hard to see how this is anything but good news for the economy and stocks overall.
Keep a close eye on how XRT responds to this week's economic data.
ETF Summary
S&P 500 (SPY) 416.46 now resistance with support at 410.68 slightly under the August 01, 2022 close of 410.77.
Russell 2000 (IWM) 194.33 the resistance with support at 191.60.
Dow (DIA) 330.46 resistance and support at 327.05.
Nasdaq (QQQ) 325.05 first level of resistance and support at 317.79.
KRE (Regional Banks) 64.51 key resistance, support level at 63.65.
SMH (Semiconductors) 242.69 resistance and support at 236.10.
IYT (Transportation) 241.29 Key resistance and support at 238.23.
IBB (Biotechnology) 133.29 resistance point and 130.73 is support.
XRT (Retail) 70.97 resistance point and with support is at 67.59.