Global X Social Media (SOCL)
Social media stocks have come under significant pressure over the past few weeks. If momentum stocks haven’t finished selling off, SOCL should be one of the first to crumble. For investors wanting to play a bounce in momentum stocks, this is not the fund to use.
With that in mind, Facebook (FB) delivered very strong earnings after hours, with advertising revenue up. The firm generated $885 million in earnings for the quarter, helping shares gain 5 percent headed into Thursday. We’ll have to see if those gains hold throughout the day, and whether it’s enough to pull SOCL closer to its 200-day moving average. Facebook is one of the two largest holdings in the fund, as it accounts for 13 percent of assets. Were the entire sector to bounce as much as Facebook did overnight, SOCL would be near its 200-day MA. Investors may want to wait until that line is clearly breached before buying; down days continue to see larger volume than up days.
LinkedIn (LNKD) and Twitter (TWTR) report next week.
SPDR Retail (XRT)
Retail is at a crucial juncture, having climbed above its 200-day moving average and then falling back on Wednesday. A bullish move could be underway according to the technical signs.
Even if the sector were to decline further, it is not necessarily bearish for the economy as consumption is a lagging indicator. If manufacturing and other industries are picking up, this is ultimately good news for the economy. However, it may take some time for wages to pick up given the still large number of people who are not in the labor force. This may curtail a significant jump in retail spending.
iShares U.S. Oil & Gas Exploration & Production (IEO)
Energy is one of the leading sectors right now and higher energy prices are generally bad for consumers and the retail sector. While oil prices slipped in the past week, natural gas looks like it wants to challenge its high for the year.
IEO and Energy Select SPDR (XLE) climbed last week, but fell back when oil prices slipped on Tuesday. IEO is overbought and there’s a gap in the chart at $88. XLE has a similar gap at $91. While that is only a small dip of 2 percent, a pullback seems likely here. For investors who want to buy into energy, wait until the gap is closed before opening a position.
iShares Barclays 20+ Year Treasury (TLT)
Treasury yields have been pushing higher this week. Higher yields (lower bond prices) are bullish for stocks. A rally in stocks this week could begin the process of taking TLT down for another test of its 50-day moving average. TLT has been in a downtrend since peaking in the summer of 2012, when interest rates bottomed. The trendline for this decline is currently below $115. A further drop in TLT would be another bullish indicator for equities.
iShares Nasdaq Biotechnology (IBB)
Biotechnology has enjoyed a rally of late but it is nearing an important technical point. There is a head-and-shoulders pattern in play that, were it to continue, implies IBB could sink below $200 per share, another 20 percent loss from current levels. If IBB climbs above $245, a gain of roughly 5 percent, it would indicate a bullish rebound may continue.