The S&P Retail Industry Index comprises stocks in the S&P Total Market Index that are classified in the GICS retail sub-industry. For this article we’ll be using The SPDR S&P Retail ETF (XRT) which tracks an equal-weighted index of stocks in the US retail industry and correspond generally to the total return performance of the S&P Retail Select Industry Index.

The performance of XRT is significantly correlated to the prevailing level of consumer confidence in the economy because the ETF represent the companies whose main business is selling retail merchandise to consumers like WalMart, Groupon, American Eagle, ect.

XRT Sectors and Holdings

To understand the current situation for the Index we need to take a look at the bigger picture since the recent recession after the 2008 Crash :

Retail Industry Index ETF ‘XRT’ Weekly Chart

The ETF Rallied strongly from it’s 2008 low showing an impulsive 5 waves advance that ended at 2015 pea. Since then, the Index started wasn’t able to rally to new highs similar to the majority of sectors in the stock market.

XRT currently is still correcting the cycle from 2008 low and looking to do a double three structure toward 100% – 123.6% Fibonacci extension area 34 – 31 where it can find buyers for a move to new highs or at least 3 waves bounce.

How can we use the weakness in the retail index to our favor ?

The world financial  market is all correlated together and every instrument is related to each other in different dimension. In our next chart we can see how XRT and RUSSEL Index are sharing the same 2016 low which was a buying opportunity around the market as the majority of Indexes rallied to new highs from.

The rally around the world is still in progress almost for 2 years now while the retail industry index remained in a sideways range during that time. As the instrument has a corrective structure taking place then we can use the extreme area to know where the next buying opportunity will take place.