Time to do a little detail in retail....
First of all, why are we on this subject? It's not big in Canada, but if retail is slowing we should be very aware. If retail is slowing before Christmas....there is gonna be a few growth stocks giving up some P/E.
Full disclosure, I have trades on in this area and specifically with some of the stocks mentioned.
First of all the USA ...
$RXl the Retail Index for the USA Weekly
Well let's talk about it.
This chart looks sad. Check the price action heading into Christmas the last 2 years. We accelerate right into Christmas closing near the highs for the year. Not this year, We have made two lower highs since the July peak. SAY WHAT? This is not good. More importantly....this is bad.
If the retailers are not being bought, going into Christmas, when are the stocks going to get any stronger? Look on the volume graph. Notice what normally would happen during US Thanksgiving. A big volume spike kicking off the Christmas charge. MACD showing major negative divergence on a weekly chart. What is divergence? The MACD should be tracking the price action. When it is not, the momentum is waning. The MACD at Christmas both of the preceeding years - nice and high, near the top of the range like the price. This year, The MACD is barely above zero. As well, the most recent pullback on the MACD dropped below zero, a potential warning.
Lastly, the RSI gave a bear market signal in August. Who would respect that heading into the Christmas season? Well, it would have to get above 70 to cancel the signal. Not even close. Now we get the benefit of reading the chart.
This chart says sell to me.
Here is the Daily:
CHeck out the Canadian Consumer Discretionary Index. There are only about 15 charts in the index, so it is very volatile. Notice how different the chart looks compared to the USA.
Here is a perennial Canadian Retail stock. Looks Good.
Here is LLL.TO Weekly
Spending 3 weeks under the 40 week line before Christmas is not good.
LLL.TO Daily
Very weak. Some volume at the right side of the chart, so maybe it starts to get some support.
Here is AMZN testing 6 month lows instead of highs.
Here is Macy's . Has been a very solid performer. Negative divergence on the MACD.
Here is Best Buy
For Homework, Check out MA, V, AXP on the NYSE. One strong, One ok, One weak.
Well, The grinch in me says avoid retail stocks.
Good Trading,
Greg Schnell, CMT
