With the markets' recent decline, investors' mindsets could be shifting into protecting gains made throughout the year. The recent blowoff from highs has also brought in more volatility with a potentially choppier environment. Additionally, pandemic worries have increased as the COVID delta variant threatens progress towards reopening countries and travel. Paired with rising inflation, many investors are searching for safer places to move money.
If uncertainty remains, we could see a rotation into consumer staples, as they tend to outperform during inflationary times and stagnant market if the indices begin to trade sideways. Consumer staples include foods and beverages, household goods, and hygiene products as well as alcohol and tobacco. Some of the big names we are watching include Procter & Gamble Co. (PG), Coca-Cola Co. (KO), Pepsico (PEP), and General Mills Inc. (GIS).
We are also watching companies in agriculture - Bunge (BG), large discount stores such as Walmart (WMT) and Target (TGT) and supermarkets like Kroger (KR) and Costco (COST).
The particularly interesting ones are GIS, BG and PG.
GIS needs a breakout over resistance from its 50-day moving average at $61.63, while BG needs to hold over its 200-DMA or Monday low of $71.73. On the other hand, PG recently broke over its $139 price area, which has a large amount of consolidation over the past 3 months. If it can stay over Monday's low, we can watch for it to clear its next resistance zone around $145.
With that said, while consumer staples can help during stagnating market action, they are still subject to risks through supply chain issues and transport costs. This means we should also keep an eye on the transportation sector (IYT) to stabilize over its recent lows of 245.48.
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ETF Summary
- S&P 500 (SPY): Watching to hold over 50-DMA at 423.09.
- Russell 2000 (IWM): Next support the 200-DMA at 206.77.
- Dow (DIA): 341.53 needs to clear. Next support at 332.68.
- Nasdaq (QQQ): Needs to hold current price level as support.
- KRE (Regional Banks): 59.02 the 200-DMA.
- SMH (Semiconductors): 247.98 needs to clear.
- IYT (Transportation): Doji day. Needs to hold over Mondays low at 245.48.
- IBB (Biotechnology): 156.78 support area.
- XRT (Retail): 91.71 pivotal area to clear.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
