Sector Overview:
The world of retail is a genuine gauge on the sentiment of the consumer. There certainly are some headwinds here, as oil prices and interest rates rise surprisingly in tandem. Of course this will bite into their discretionary capital, but if wage gains continue to creep higher, even though they are simply keeping pace with inflation, that could invigorate purchasing behavior. A bit of a conundrum, and why I rely on PRICE action as that is the ultimate decider if we are correct or not. We know many retail names have gone the way of the technology subgroups semiconductors and software. This is a bearish development obviously. We gave examples in last weeks consumer report like FND, a former leader, now looking at a 6 week losing streak and has been chopped in half from highs made back in April. Unfortunately there are more to add with the likes of FOSL and LE both lower by 37 and 48% respectively from recent 52 week highs. With each week it seems more potholes are rearing their ugly faces.
Group Performance:
Concerning overall is the softness displayed by the Russell 2000, which slumped 1% Tuesday and is now nearly 3% above the line in the sand, round 1700 figure. I highlight this as the XRT is dominated by small cap plays, which will be weighed down by the Russell. Today the ETF plummeted 3.3%, its worst loss in well over a year, in volume the second strongest of 2018 thus far. It is now on a 4 session losing streak, and down 7 of the last 8, and CLOSED well below its 50 day SMA. The fund is now well below a 51.06 cup base trigger, and breakouts that fail so quickly should not be ignored. On a weekly basis it has surrendered 3.8% with just 2 days in, and a CLOSE below the very round 50 number Friday would be the first in 9 weeks. This slump looks very reminiscent of the financials debacle last week with the XLF cratering 4%. The consumer is on alert, and it is no coincidence that this section is highlighted blue as it could be very well how they are feeling.
Examples:
In rangebound markets one will be able to quickly decipher which names are holding their own against peers. In the gaming segment of the consumer group there have been some interesting developments. EA for a long time had been considered the undisputed leader, but its chart has since become unhinged. It now trades well into bear market territory, lower by 23% from most recent 52 week highs (on its weekly chart could be bottoming with three consecutive bullish hammers the weeks ending between 9/7-21 that also CLOSED taut all within just .75 of each other). Below however is a name that has shined in the space ATVI, and how it was profiled in our Thursday 9/27 Game Plan. It now trades above both a bull flag trigger of 82 and a cup base trigger of 81.74 on 9/27, and is on a 5 session winning streak. Look for the round 80 number to be a floor going forward.