There is broad weakness in the retail sector Thursday. The three biggest losers in the S&P 500 can be found in this space. So no surprise that both the (RTH) and (XRT) are under pressure and are set up for more upside. The XRT is working on an ugly weekly downside reversal. On Tuesday morning, the index began the session above the June and July highs with the help of a powerful gap higher open. Since the early going that day, the XRT has been drifting lower and is well into new low territory for August.
With intense overhead pressure in place investors should not be surprised with a continued sell off in the near term. The good news: once this momentum has run its course, a major support zone will be tested. Patient bulls should keep a close eye on the $38.70 to $37.70 area. This $1.00 zone includes the 2014, 2016 and multimonth-2017 lows. A sign of stabilization here would provide a very low-risk entry opportunity. Until then, the XRT will likely be a frustrating long.
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