AMZN Crushes The Consumer Staples ETF. What’s next?

August 24, 2017

Mish's Daily

By Geoff Bysshe

blankThe Trump news de jour was the likelihood of a debt ceiling vote NOT happening before the deadline, and the media loves to portray this as a time bomb for the markets. I don’t believe it, and neither did the market today.

The QQQ had a rough morning sliding below Tuesday’s low and filling the gap from Tuesday morning which is where it abruptly turned around. This is why so many traders focus on ‘unfilled gaps’.

It was hard to get too concerned about the weakness in the QQQ when the IWM was trading up on the day and over the highs of the last two days.

As I’ve been saying, don’t get too concerned about or trust the moves in any one index if the other are not following along decisively.

And if the move is based on something the president said, think twice before you trade.

The real important news of the day was in AMZN’s announcement that as soon as Monday it will be cutting prices on its Whole Foods best selling grocery staples!

Additionally, Amazon Prime members will soon enjoy a host of discounts and benefits at Whole foods.

This naturally sent the Consumer Staples ETF, XLP plunging! This is because WMT and COST collectively make up over 10% of XLP, and they’re both expected to get hurt by AMZN’s pricing pressure.

This news comes on the same day that Sears announced miserable sales numbers (comparable stores -9.4%), and that it was on track to complete the closing over 300 stores in 2017!

Is this what’s next for Walmart and Costco?

I doubt it, but perhaps they should consider cross honoring the Amazon prime member discounts in their stores the same way many retailers do with coupons.

This also raises an interesting question for the market technicians…

A declining XLP could be interpreted as reflecting a weak consumer and therefore bearish news for the market. I don’t think lower prices and a better shopping experience at Whole Foods thanks to AMZN describes nor should it be considered, a ‘weaker consumer’.

The devil is always in the details.

 S&P 500 (SPY) Support at today’s low 243.70, then 243.55, and a gap fill at 243.20. Significant resistance at 245.60, 246 and 246.50

Russell 2000 (IWM) Best performer today. Support at 135.75 and then 135.50 and 135. Expect resistance at 137.00-.20, then 137.70.

Dow (DIA). Gap fills at 217.  Expect resistance around Tuesday’s high, 218.85, then big resistance at 220.

Nasdaq (QQQ) The weakest index today. Look for support around 142, and 141.50, today’s low. Gap fills at 140.18. Resistance is at Tuesday’s high, 143.35 and 144.00-.40

KRE (Regional Banks) Inside day. Support around 51.50. 54.00 is major resistance.

SMH (Semiconductors) Showed good relative strength again today, but still range bound – 84 to 88. 85 is good support.

IYT (Transportation) Continued to break down. New multi-month low and closing low. More weakness could lead to a big slide. Next big resistance is at 168.

IBB (Biotechnology) Finally broke the big resistance at 312.30. Look for support around 312 and 311. Should now hold over 308.50. Next big resistance area to break is 318, but there is plenty of resistance leading up to that.

XRT (Retail) traded well above 39, but couldn’t hold it.

IYR (Real Estate) Gapped up to the 81 resistance area then sold off so that’s still the big level to clear. Everything is noise between 79 and resistance at 81.

XLU (Utilities) Another new high. Support at 54.40 and 53.60.

GLD (Gold Trust) Key levels to break are 122.80 and 123.50. Over that it runs. Look for support at 120.50.

GDX (Gold Miners) Closed above 3 consecutive inside days, but didn’t make a new high for the move – 23.50 is the level to break. Key levels to break. Look for support at 22.30-.50

SLV (Silver) 16.30 clears key high and the 200 DMA. 15.50 area is support.

USO (US Oil Fund) Tight consolidation continues. Looking for a break over $10.

UNG (Natural Gas) Still in a bear trend according to phases. If it has a 30-min Opening Range breakout over 6.75 it could indicate a multi-week bottom. The all-time low is 5.78, the weekly base high is 9.80. So the risk is just over a $1 and the first target is just over $2, but if it breaks $10 then $12 is the next stop.

KOL (Coal) Consolidation day after a big close over $15! Look for support at 14.90-.80.

TAN (Solar Energy) 22.00 resistance and 21.00 support. That’s all you should focus on.

TLT (iShares 20+ Year Treasuries) Expect support at 126.00 Should not break 124.50. Big support at 124. Resistance at 127.50, 127.90 and then 128.15.

UUP (Dollar Bull) This is simple and big. 23.96 to 24.20 is the low zone of a multi-year range. Look at your weekly charts for any close over a prior week’s high that is over 24.20. Until then, stay away.

FXI (China) New high for the move. Support at 43 and 42.50. Next resistance is 44

EWW (Mexico) It looks good. Should hold 56, 57.75 is the high to break.

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