Sees Consumer Weakness in Some Big Ticket Items
The long term charts are indicating continued strength is most consumer stocks. However, if the US consumer is weakening, this weakness may be starting to show in the long term stock charts of big ticket consumer stocks. For most retailers, however, it appears that the stock market is not seeing an end in site for the US spending spree.
Below is the seven year weekly chart of the Retailer Holder’s ETF (RTH), an ETF that lists the following retailers as its top holdings according to Yahoo Finance. Most of the stores in the list sell small ticket chattel purchased by US consumers.
Although the chart is somewhat “sloppy,” the Retailer Holders has been in an unabated bull market since 2003. It hung around its former high at about 95 for three years before breaking into new high ground. If the US consumer is weakening, you cannot see it in the long term chart of the Retail Holders ETF. In Wednesday trading all of the top holdings were up except for Wal-Mart Stores.
Examining the long term charts within the broad line retailers suggests that Wal-Mart is the weak sister within a strong sector. In the teeth of a bull market in retail, Wal-Mart has done nothing except vacillate.
In the longest of terms, one can easily observe the importance of $40 as an important long term support level for Wal-Mart, and perhaps this is an important line of demarcation for the middle class US consumer.
Moving up the retail food chain, those catering to the upper middle class have succeeded in riding the bull market. Note excellent long term strength in Nordstrom, Federated, and J.C. Penney.
Federated is in a bullish channel.
J.C. Penney is in a long term bullish trading channel.
Perhaps a bit less technically strong is Target Corp., a broad line big-box retailer.
The shorter term charts of the broad line retailers catering to the lower middle class could be showing some signs of weakness, as J.C. Penney may be in the process of forming a head-and-shoulders (HAS) reversal. Note – The pattern is not a completed pattern until it is completed.
Similarly, Target may be in the midst of a reversal. The salient word is “may.” Note the former resistance line which is now support.
Consumer stocks involving big ticket purchases of the US consumer are showing strength at the high end but less strength toward the low end of the US consumer food chain. While stocks such as Tiffany are at all time highs, Brunswick, Harley Davidson, Polaris, Marine Products Inc. Winnebago, and Thor look weaker.
Despite sharp rallies, Brunswick remains in a long term bear market.
Harley Davidson, Inc. (HOG-a new ticker symbol) had a steep decline from its all time high.
Although it rallied back from $36, volume was lackluster and Polaris Industries (PII) remains well off of its 2005 high at about $70/share.
Marine Products Inc. (MPX) sits below both its 10 and 40 week moving averages.
There is technical support at about 39 for Thor Industries, Inc. (THO).
There are similar characteristics in the long term charts of big ticket, big box retailers such as Best Buy, Circuit City, Lowes and Home Depot. Forty-two (42) is a key technical level for Best Buy (BBY).
Circuit City (CC) had a bad quarter, and it is now in a bear market.
In spite of the bull market in stocks and retail stocks, Home Depot has remained in a trading range for over 3 years.
It’s been smoother sailing for Lowes Companies (LOW). However in recent weeks, LOW has faltered.
The daily action shows that the bullish backdrop of the market is still entirely intact. Note the whipsaw directly above the 200 day moving average and the support line.
As a fundamental gold bull, the following has been a concern for the last month or so and so far nothing has changed. The concern is that gold has been tracking stocks, and with the stock market vulnerable due to its overbought condition, gold would be similarly vulnerable. Below is the 8-month daily chart of stocks, as represented by the Wilshire 5000 (right scale) overlaid on the performance of gold (left scale). As you can see, they are tracing practically the same price action. If stocks are correcting (and there was some indication of this in today’s distribution day action to suggest that they are), it is likely that gold will also correct. This correction in gold is clearly well underway as discussed below.
Now being a worry wart, I have another gloom and doom scenario to propose. (Not yet confirmed in charts.) The “fact” that almost everyone “knows,” bulls and bears alike, is that the world is “awash in liquidity.” This “truth” may indeed be as such, but if this were a trade, it surely would have practically everyone on the same side of it. I don’t know anyone involved in the financial markets who would not say “true” to the statement “the world is awash in liquidity.” If you do a Google search for the quotation, “awash in liquidity,” you will find a total of 10,200 “hits,” with practically all of these related to the financial markets. So why if I may ask, has gold hit a 7-week low today? I would humbly suggest that if this “liquidity” was drying up, then it would show in the price of gold which has been correcting for the last 7 weeks – well before the latest Bernanke Fed-speak of yesterday. By the way, how fast does liquidity dry up? Pretty fast? At the blink of an eye? With a loss of confidence, instantaneously perhaps?
And while we’re on the subject of liquidity, don’t we have an analogous situation to the Nasdaq year 2000 bubble, and the Japan 1990 bubble in the current action of the Shanghai Market action, which seems to rise over 1% every trading day? What would happen to this clearly unsustainable price action with a loss of liquidity?
There’s nothing to worry about! Just put on Cramer or review this web site late tonight. Today’s action was just a simple buying opportunity!
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