Consumer overview:
The retail arena has come back strong, recovering well after not to ago under the threat of AMZN. Their have been some chinks in the armor as bifurcation surely exists. Look no further than former leaders that have been cut down to size, pun intended. Stocks like AEO ANF URBN CPRT or FND are now all well within or right at bear markets more than 20% off most recent 52 week highs (casual dining laggard DFRG is now 55% off its recent highs, not a typo). Their has been some M&A in the space as SONC is being swallowed by Arby’s, and KORS buying Versace That type of activity should be construed as bullishly, and remember we just had a fantastic Consumer Confidence number, that came in at 18 years highs just above 138. Bears may ask if it is getting to frothy, as if you were to chart the index it is approaching a possible double top hit just over 144 made in May 2000, and we all know what happened during that time period. The bear growls may reach become deafening and omnipresent.
Examples:
The group that derives nearly all its revenues based on the home, have quite frankly been on the soft side. We all are aware of the weakness in the builders themselves, as the ITB trades in bear market mode 23% lower from most recent 52 week highs. And not surprisingly the periphery or furnishing plays have had a rough go of it. Peers RH and LZB are 18 and 19% off their respective highs, with the former looking better as it filled in a gap recently right at the round 120 number. Below is the chart of WSM and how it appeared in our Thursday 9/20 Game Plan. It still trades trades 11% off its most recent highs, but the chart successfully retested a double bottom trigger of 63.27 this week which nearly filled in a gap from the 8/22 session, and found support at a rising 50 day SMA. This Monday recorded a bullish hammer candle and today rose 2%, and tomorrow it will look for back to back gains for the first time in nearly 3 weeks.
Seasonality:
Retail itself has been on the upswing, and the cyclicals are your best major S&P sector on a one year basis. They are up 33% over the time period, via the XLY, edging out technology by 2 percentage points. The cyclicals are a broad group, but dominated by the retail stocks. Bulls must admire the action as the staples component within consumer names begin to show signs of frailness, and their strength this summer was a concern. Below is the chart of how the XRT has performed, and over the last 5 years we see the October-November period being robust, with November the best acting month as the ETF CLOSED higher 4 of the last 5 years from where it began the month. Interestingly it did not join the December rally more than half the time. The XRT itself is acting very well as it just successfully retested a cup base trigger of 51.14 taken out on 8/14 and is now looking for its eight consecutive weekly CLOSE above the very round 50 number.