Buy Alert! Inflation ETF To Spike Higher
RoboStreet – October 21, 2021
Markets Revisit High On Strong Consumer Spending
It’s pretty common knowledge that consumer spending drives 70% of GDP, which is forecast to end the year at around 5.7% according to S&P Global Economics. The most recent retail sales data for September released on October 15 showed a stunning increase of 0.7% versus economists’ estimate of -0.2% and retail sales ex-auto rose to 0.8% versus forecasts of 0.4%.
What’s most impressive is that the retail beat came during a time when the stock market was teetering on the brink of a full-blown correction amid rising inflationary pressures impacting gasoline, food, travel, entertainment, and eating out. Apparently, there is still $1.6 trillion in unspent government stimulus money in the hands of consumers that might be starting to loosen up after recent data showing progress on Covid and jobs.
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Newfound bullish consumer spending binge has fed into market sentiment
In any event, this newfound bullish consumer spending binge has fed into market sentiment, taking the major indexes back up to the all-time highs with earnings season only 20% in the books. This higher move in stocks also comes at a time when the yield on the 10-yr Treasury is 1.67%, a level not seen since this past May, and WTI crude trading up to $83/bbl. To see the consumer exhibiting strength in the face of the cost of living and the declining market is counterintuitive and impressive.
CURRENT TRADING LANDSCAPE
The $SPY settled at the all-time high, of $452 on Wednesday. The value/reflationary stocks traded higher, up 1%, and closed at the all-time high. The technology stocks closed in the red, down 0.3%, and settled 2% away from the all-time high.
The $DXY is short-term overbought and retesting key long-term support at $93.5 (break of this support will be bullish for the reflationary stocks). The $TLT continued the bottoming process, retesting recent lows near the 200-day moving average.
SPY overhead resistance is at $452/$455
The $SPY short-term support level is at $449, followed by $445. The SPY overhead resistance is at $452/$455. Short-term, the market is overbought and due for a shallow pullback in the next few sessions. Based on our models, the market (SPY) will trade in the range between $428 and $455 for the next 2-4 weeks.
One recent development that deserves the attention of investors is how the dollar has started to weaken, even with the widespread consensus of Fed tapering to be announced at the upcoming FOMC meeting on November 2. The surge in the money supply since the pandemic took hold has been almost straight up. Yet the dollar has held its ground relatively well during this unprecedented time of liquidity creation.
The recent break in the dollar’s uptrend triggered an array of signals in our proprietary AI models that guide our investment decisions in our RoboInvestor advisory service. I look for confirmation of when key macro components, like the dollar, make a sudden directional move, and what that means for market sectors and stocks that we want to consider for the RoboInvestor portfolio.
The one-month chart below shows the dollar index (DXY) topping out just under 94.60. Now in a downtrend where 93.00 is the next level of support.
A weaker dollar bullish for metals, miners
A weaker dollar is bullish for metals, miners, and materials. With a broad majority of the stocks in these sectors trading near the low end of their respective intermediate-term ranges, there are several compelling opportunities that our AI platform has identified and are actionable.
Looking at our A-driven Forecast Toolbox the S&P Metals & Mining SPDR ETF (XME) is most attractive in that the ETF registers a Model Grade “B” rating and a short-term Predicted Resistance price target of $48 over the next two weeks, implying a move higher of more than 10%.
The one-year chart of XME below shows a well-defined trading range. A technical pennant formation that typically culminates in an upside breakout. The 20, 50, and 200-day moving averages are all converging in the $43 range, where if our AI signals validate the technical, we’ll be advising RoboInvestor members to buy.
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“I’m investing my own money in each and every stock as my AI platform identifies.”
And remember we’re not talking about day-trading here.
Click Here – To See Where I Put My RoboInvestor Money
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