What Happened To Retail?

There have been many odd twists in the market lately, but this is the oddest one - I can't figure it out.

If we are about to add $1.9 T in support, why are many of the retail names so weak? Let's walk through a few "stores."

LULU appears to be so last year. Making new 9-month lows on Friday, it is now below the 200-day moving average (DMA). The SCTR suggests it is one of the worst stocks in the mid-cap group, with a ranking of 9%. That's poor. On the purple area chart, it has continued to underperform the S&P 500 for the last three months. The PPO momentum trend is also weak. Both the downtrend and the 200-DMA will provide resistance, so we'll need to work through those levels.

Here's the good news. The stock had the highest positive volume day of the year on Wednesday. Price action looks like it is surging off the false breakdown.

One of the larger shocks is Costco (COST). A great online presence. A destination store for people trapped in their homes. A wide variety of value through to elegance. But one look at the stock and you can see it is very weak.

The negatives: The SCTR rank is 4.0%, which I find almost amazing. The relative strength has been sliding since December, much like LULU. The stock topped on December 1 and has since dropped 20%. With the acceleration lower for the last three weeks, this looks like it has fallen with the rest of the momentum names as yield went higher. Thee volume looks capitulatory, which is to say, anyone who was thinking of selling probably has. The momentum trend on the PPO is at the lowest level on the chart, which surprises me.

The positives: With the stimulus package passing, the stock is rallying above the downtrend line. After the capitulatory low, this is a nice entry with a close stop. The PPO is trying to turn up, but it has not finished yet! The stock has lots to overcome to change the trends on this chart meaningfully. If you think the 1.9 T is going to move a lot of TV's, Costco's probably a destination.

Another retail stock with the price below the 200 DMA is Walmart (WMT). Without hitting copy and paste for all of the descriptions above on Costco or LULU, we have the same situation setting up. If you like to shop for sales, there might be one on the stock, if the low prices inside the store don't entice you first.

So those three stocks all look weak. There are other retail names doing much better, but I like how close I get to set my stop with the backdrop of stimulus being mailed to every household. Are we looking at the lows for the year in these three names? We won't know for a while, but as the economy reflates, this might be one place to look.