The SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail exchange traded fund, is up about 1% year-to-date although the fund was recently hampered by an earnings miss by Dow component Wal-Mart Inc. (NYSE:WMT). Some market observers believe XRT is poised to climb in the weeks ahead.
A broader group of consumers are adding to improved retail sales this year, compared to 2016 when spending was driven by high-income shoppers. The improved jobs market and rising wages may have helped drive the broader consumer spending spree, analysts and economists said.
“XRT touched a two-year high of $49.08 on Jan. 24, before pulling back with the broader stock market. However, the exchange-traded fund (ETF) found support atop its 80-day moving average, in the vicinity of a 50% Fibonacci retracement of its rally from November lows to the aforementioned peak. Shares of the fund closed yesterday at $45.34, and are on the cusp of a historically bullish time of year,” reports Schaeffer’s Investment Research.
However, XRT faces competition from ETFs that are more levered to the boom in e-commerce. The trend away from traditional department stores and apparel retailers to online shopping destinations should benefit the Amplify Online Retail ETF (NasdaqGM: IBUY), which is comprised of global companies that generate at least 70% of revenue from online or virtual sales.
On the other hand, historical data confirm that XRT is worth considering with March right around the corner.
“Per data from Schaeffer’s Quantitative Analyst Chris Prybal, XRT has averaged a March gain of 4.2% since inception — its best month of the year,” according to Schaeffer’s. “That’s followed by an average April gain of 2.8%. From current levels, a 4.2% boost next month would put XRT around $47.24. A subsequent 2.8% burst would have the shares around $48.57 — back near two-year highs.”
XRT features exposure to the following retail industries: Apparel Retail, Automotive Retail, Computer & Electronic Retail, Department Stores, Drug Retail, Food Retailers, General Merchandise Stores, Hypermarkets & Super Centers, Internet & Direct Marketing Retail, and Specialty Stores.
“The ETF’s Schaeffer’s put/call open interest ratio (SOIR) of 2.12 ranks higher than 82% of all other readings from the past year. This indicates that near-term speculators have rarely been more put-biased during the past 12 months,” according to Schaeffer’s.
For more information on the consumer sector, visit our consumer discretionary category.