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Powerful Breakouts [3 Must-See Charts]

All eyes are on Turkey early this morning as the lira craters double-digits against the dollar, dragging the country’s economy into the danger zone.

“The currency’s plunge reflects a range of concerns, including tensions with the United States and the unwillingness of Turkish authorities to raise interest rates,” CNN Money reports. “Turkey has threatened to retaliate after the Trump administration imposed sanctions on senior Turkish government officials for their role in the detention of an American pastor.”

European stocks have fallen deep in the red today on contagion fears. Will the bad vibes spread stateside? Or will this week’s breakouts push resilient U.S. stocks higher?

Let’s go to the charts to find out…

1. Old-school retail stocks soar

Some prominent retail gains are pushing the brick and mortar sector to new all-time highs this week. Sure, Amazon captures all the attention from investors and analysts. But there’s plenty of room for other retailers in our consumer-centric economy.

During the January melt-up rally, we noted how the SPDR S&P Retail ETF (NYSE:XRT) was back on track and even outperforming the red-hot Nasdaq Composite. At the time, beleaguered retail names were helping lead the charge higher.

But the February correction slammed XRT. The retail ETF quickly coughed up its market-leading gains and sunk into the red. It was teetering near its December lows by the end of the first quarter.

That’s when the new rally started. The retail ETF launched off its March lows and didn’t look back. It’s now up almost 14% year-to-date after breaking out to new all-time highs this week.

Brock and Mortar

Bloomberg notes how bigger industry trends are starting to spin in favor of the traditional retailers. Rents are dropping for commercial retail spaces. Meanwhile, Amazon is facing major increases and shipping and online advertising costs.

We remain in a strong position to capitalize on the next leg of the “rebirth of retail” story. In fact, we’re witnessing yet another strong breakout in our Dollar General Corp. (NYSE:DG) position, which is now up nearly 5% on the week as it sneaks up on its January highs.

But old-school retail stocks aren’t the only trades making waves this week…

2. Can cybersecurity stocks find their mojo?

2018 has been a breakout year for Cybersecurity stocks.

Cybersecurity has emerged as one of the most important investing themes in the tech space. The PureFunds ISE Cyber Security ETF (NYSE:HACK) did an exemplary job hanging onto its gains as the major averages tested their correction lows during the first half of the year. A picture-perfect bounce in early February has helped this cybersecurity ETF maintain its gains during difficult market conditions.

HACK even miraculously outperformed the Nasdaq Composite during the first few months of 2018, posting double-digit gains well before the end of the first quarter.

But the cybersecurity sector started to run out of gas toward the end of June. A quick drop scared off the swing traders — and a failed run at new highs less than one month later killed the group’s momentum.

But all is not lost…

HACK

HACK once again found a floor near its June lows. It’s now pushing back toward its all-time highs despite a rocky earnings season from some of the sector’s most prominent players.

I know it’s been a difficult summer for these stocks. But a push toward $40 would repair all the damage and set the stage for a potentially powerful fourth-quarter rally in these important tech stocks.

3. The calm before the storm?

It was a drama-filled week for the financial media. The same can’t be said about the action in the major averages.

The S&P 500 remains locked in a holding pattern this week. Volatility remains low — and the S&P is staying in a narrow trading range for now.

Just don’t get too comfortable…

S&P 500

Despite its best efforts to play dead this week, the S&P is quickly approaching its January highs. The quiet trading environment we’re experiencing right now could very well be the calm before the storm — a strong rally where the S&P 500 would join the Nasdaq Composite at new all-time highs.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO, The Seven Figure Formula and Seven Figure Signals. Over the past decade, Greg has helped build the small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate, and countless other publications. Greg is a member of the CMT Association...

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