Does Retail Lead SPY In Topping?

I was running through some sector ETFs, looking for what was a decent ‘pair trade’, and stumbled on something a bit odd. Earlier we saw what looked like a Gold : QQQQ (Nasdaq 100) counter trade set. Now look at this chart:

Retail ETF XRT vs Gold and S&P 500 Nov 2015

Retail ETF XRT vs Gold and S&P 500 Nov 2015

Notice that Retail ‘rolled over’ before the broader market of the S&P 500, and that at the same time, gold GLD had a counter move up. Retail had its final attempt at a new top in Mid-July, just as Gold hit a low point. Then as retail heads down, gold is flat for a while then starts a spike up as retail fall apart. That happens at the Mid-August point where SPY finally has a rollover from that long flat top.

So one question is: Did XRT the Retail ETF serve as an early indicator that the market (in the form of the S&P 500 / SPY) had started to roll over? Rather like we saw earlier with Transports?

I think so. But it will take a few more times of seeing it happen again to fully trust it.

Next, notice that gold (modulo some wobbles) is often moving counterpoint to Retail.

Gold shoots up January 2015 while retail takes a dip. Gold drops into April while Retail rises. Gold does have a long term downtrend from that Jan 2015 peak to now, but wobbles up Aug-Sept-Oct while Retail fades.

It sure looks to me like someone is doing a Gold / Retail pair. Long one, short the other. (Or selling gold to finance a stock buy, then buying gold when the stock is sold, which is the same thing in effect).

The pink line, TLT, is 20 year govt Treasuries bond fund ETF. It mostly moves with gold, but sometimes does not. The classic pair trade is stocks vs bonds and for a long time TLT / SPY often showed artifacts of that. To me, this looks like someone who is likely NOT in the USA and not interested in US Bonds, perhaps with a weak local currency ( € today was something like $1.09 and very weak… Chinese Yuan about as bad), someone who wants a $US like alternative to their local currency as the other side of the trade. But…

I do have to mention that as SPY went flat, TLT spiked up. Then faded into late June. As Retail rolled off, TLT started another spike up; and earlier than GLD. It is possible there is a 3 way trade going on here, or a couple of ‘whales’ both working slightly different trades, but both in the data.

In either case, watching GLD / TLT vs some stock sectors might be very interesting and useful. In particular, it looks like Transports (DJTA) rolled off first, then Retail (XRT) and only later the broad S&P500 (SPY). QQQQ (Nasdaq 100) is at a high matching (in the margin of error) the prior high of Mid-July, so perhaps it is last in the set to roll.

I’m going to see if I can put together a set of ETFs on one graph showing a progression in the rollover, and the ‘risk off’ counter asset class. If anything interesting comes up, I’ll post it. (Feel free to have a ‘dig here!’ at Bigcharts on your own favorite sectors and give a heads up if you spot something. Otherwise it can take me a while to work through them all…)

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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