I thought I would follow up on a commentary made on this blog back in May regarding the retail sector. Here is the original blog: https://www.valuetrend.ca/?p=2918
My take on the sector was that retail was in a consolidation pattern – a triangle to be exact. I noted that should retail break the triangle on either side, it might give guidance as to which way it would trade. I noted that, although the trend remained up at that time, there were growing signs of danger.
If we review the longer termed weekly chart above, you will note a break in the trendline. Momentum indicators are trending down, and the shorter termed moneyflow indicator (top pane) CMF has dropped below the 0 line. Relative strength against the S&P 500 is terrible. The longer termed moneyflow indicator is neutral (bottom pane)
On the daily chart, again lots of falling momentum and moneyflow studies can be seen. Most importantly, the 200 day moving average (red line) has just been cracked, although as you will see this can happen over and over during any consolidation phase – more importantly, the triangle has also been penetrated to the downside.
All in, retail had better pick up soon, or it would look like that sector is in for a world of hurt. My thoughts: Avoid the sector for now, and watch for signs of reversal before considering retail stocks.
-VALUE LINE ARITHMETIC NOW VIOLATES KEY UPTREND LINE
-STOCK/BOND RATIO AT THE BRINK -5 YEAR YIELD BETWEEN TWO KEY CONVERGING TRENDLINES
-GOLD/STOCK RATIO ON THE VERGE OF AN UPSIDE BREAKOUT
-ASCENDING WEDGE ON SPX NOW UNDER 1930 (BREAK POINT)
-GERMAN I-SHARES (EWG) UNDER 200 DMA (EUROPE WEAKNESS COMING TO U.S.?)
LONG TERM DETERIORATION OR JUST ANOTHER BLIP?
I’m in the “just another blip” catagory
So Keith you sure nailed the timing of last post: “Temporary correction due”- will you let us know when you think it is done correcting? Would be much appreciated!
Looks like there is lots to keep a see-saw market going in August. Keep reading the blogs–I will keep calling it as I see it.
Retail may turnaround soon with ‘back to school’ just around the corner and then wait for the big event…Christmas.
Seasonal tendency is for retail to rally from late October and on through the winter. So you may be right, although I will defer to the charts before getting into a position. If the charts break down, I will not rely on the seasonal trade. Thus, what happens over the coming month or two is important.
Retail may get a bump from ‘back to school’ buying followed by robust Christmas sales.
XRT has gone higher per my previous comment. All indicators; money flow, STO, MACD, RSI are all pointing up! Is this a good time to buy?
Big resistance at $88-89, I’d wait for a breakout. Seasonal strong period starts in October for this sector.