Retail Stocks- Head & Shoulders patterns in play? Bullish or Bearish?

retail head and shoulders patterns may 11

CLICK ON CHART TO ENLARGE

Is the price action of retail stocks meaningful to the broad markets? Does it tell us anything about the condition of the consumer in the states? Above looks at retail ETF XRT on a weekly basis.

The upper left chart reflects the potential that a bullish inverse head & shoulders bottoming pattern could be forming, with a test of the right shoulder in play right now at (1).

The lower right chart reflects the potential that a bearish head & shoulders topping pattern could be forming, with a the potential right forming at (2) above.

Rumor has it that the economy in the states is impacted by what consumers do.

If this is true, the patterns in XRT looks to be pretty important at this time, because which pattern is true, could highly impact portfolio construction going forward.

 

Risk On Bonds- Testing key breakout levels, will stocks follow?

debt etfs all hitting 38% level may 10

CLICK ON CHART TO ENLARGE

To be long and strong stocks, one likes to have confirming signals.

Above looks at four different bond funds, that one would prefer to be heading higher, if you are long and strong stocks.

As you can see most of these bond funds started heading south in 2014. About the time they did that, the NYSE struggled to make much upward progress over the past two years.

pimco junk fund and nya comparison may 10

CLICK ON CHART TO ENLARGE

Majority of these bond funds in the top chart, have rallied since February lows were hit. Now each of them has retraced around 38% of the declines over the past couple of years.

The “Risk On” trade for stocks, would like to see these bonds break above falling resistance and the 38% retracement levels.

 

Germany- Leading index breakout test 4% away!

dax spx resistance levels may 10

The DAX index (Germany) and the S&P 500 have followed similar paths over the past few years. Both bottomed in 2009 and 2011 around the same time. The DAX hit 5-year rising channel resistance in April of 2015 and reversed course quickly.

The DAX peaked a couple of months ahead of the S&P 500 last year. 

Over the past year the DAX has continued to create a series of lower highs and finds itself around 4% below channel resistance. The S&P 500 finds itself around the same percent below last years highs, which took place around the 2,150 level.

Both are facing key resistance levels, around 4% above current prices. If both can take out these resistance levels, it would send a bullish price message to investors around the world. What both of these do with the resistance zones around 4% overhead, should be very important for portfolio construction going forward.