Sectors To Watch This Week

The consumer will be front and center as the monthly sales report for March is released. The expectations are for 0.4% growth in sales. The same stores sales data was positive which would lead one to believe the report will be positive as well. I would expect the data to track what we have been reading about the consumer overall. They have been spending at a modest growth rate. The chart below of XRT, SPDR Retail ETF shows the steady uptrend in the sector. The test or pullback in place held support at $58.80, but the previous uptrend line becomes near term resistance. The sales report could go a long way in helping the sector and the broad market bounce back, if it provides some confidence looking forward.
Financials had a tough week as the sector dropped 2.5% and the banks were down more than 3%. JP Morgan (JPM) posted solid earnings on Friday along with Wells Fargo (WFC), but both sold off more than 3.5% on the news. The question is whether this is an opportunity to buy or the beginning of more selling in the sector? Monday will bring plenty of data from other financial stocks as Citigroup reports earnings. Watch JPM to hold support above the $43 level and move higher. A move lower brings $40.80 into play. Watch KBE, SPDR Banks ETF as a proxy for the sector overall. A move below $15 on XLF, SPDR Financial ETF will be a negative for the broader markets.
Transportation as a sector has been moving sideways. JB Hunt reported solid earnings, but did nothing to impact the upside of the sector. The transports might be a sign of what the future looks like for the broad markets. Sideways trading. However, we have to take into consideration that rail traffic is picking up according to the analyst and the data. Despite the pick up in traffic CSX and NSC show the lack on interest in the rails by investors. The global picture for shipping and air traffic are up as well. If the fundamentals are improving we should keep the sector on our watch list and scan the parts for the leader to emerge. This is a dull sector to watch, but it does provide some positive returns when the trend catches an up draft.
 
Treasury bonds are worth watching on the upside. Yes, that is what I said. Why? The fear factor is back in play and along with the Federal Reserve. Yields have fallen on the thirty year bond back below the 3.2% yield showing a return to the previous trading range. The chart shows a break of the downtrend line off the December high with a short term target of $119.20 on TLT. There is the issue of follow through and catalyst for the move in place, but it is still hard to believe if stocks are going to rally that bonds will rally as well. If the Treasury bond continues to move higher watch for stocks to trade lower. There is the option they both shift into a sideways trend looking for direction and clarity short term.
The broad market is in transition. The direction is setting up to be sideways. The trading range is being built and the uncertainty produced by a lack of clarity looking forward will have to be worked out in the coming weeks. Earnings are the logical place to look for guidance and confidence. Thus far they have been positive, but the continued disappointments from the economic data and Europe are offsetting any good news for investors. That has resulted in some short term selling and a sideways movement. If the negative data empowers the sellers we could see a test of 1340 support on the S&P 500 index. Set you stops and manage your risk as this all plays out short term.