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SPDR S&P Regional Banking ETF (KRE) & SPDR S&P Retail ETF (XRT)

It has been a tough week for stock markets around the world. August has historically been one of the seasonally weaker months of the year already after earnings season winds down and investors go on summer vacation. This week, concerns related to last week’s downgrade of Fitch’s US credit rating and this week’s soft trade numbers out of China have also rattled investor confidence.

Although most major indices and industry groups have declined over the last week, this action appears to be a common correction with markets bending but not breaking. Most country and sector ETFs which we track are on moderate, if any, reversals, with few outright pattern breakdowns at this point. Recent sector action in the cash flow movement (measured through the BPI in Sector Scopes) suggests a market which has shifted from slightly overbought back to neutral.

Sector action indicates that groups which had previous underperformed and have been playing catch up lately have continued to attract support including Mid Caps, Small Caps, Financials, Energy, Health Care and Industrials. One area which has been particularly weak technically of late has been Alternative Energy. Commodity action has been mixed with Energy contracts rallying but Metals, Grains, and Softs (particularly Lumber) struggling.

In terms of business news, on the economic side, the focus is on inflation numbers, starting with US Consumer Prices today, and continuing with Canadian and UK reports next week. Retail Sales figures for the US and China, plus the start of North American housing data may also attract attention. While the main part of earnings season is wrapping up, earnings for retailers begin to roll out next week, starting with Home Depot on Tuesday and Walmart on Thursday.

In this edition of Equity Leaders Weekly, we look at continuing rebounds in regional banks and US retailers/drug stocks.

SPDR S&P Regional Banking ETF (KRE) 

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