Group Overview:

The XLY is getting ready for a line in the sand retest at the very round par figure. That level was support in both October and November before breaking below that number which was the horizontal line in a bearish descending triangle trigger. It came nowhere close to achieving its measured move lower of 18 handle, but measured moves are barely a guideline. That being said the bears are still in control as the ETF is still 16% off most recent 52 week highs, and that is with the current 2 week winning streak that rose a combined 5.6%. There was some foreshadowing as a 3 week tight pattern at all time highs, was taken out to the DOWNSIDE as the three weeks ending between 9/14-28 all CLOSED within just .30 of each other. The last 2 sessions recorded spinning top candles after a quick 10% move. January should prove very valuable to the direction of this group, and the overall market. If history repeats itself like the beginning of 2018, when the XLY climbed above 100 on the very first day of the year and proceeded to advance 14 of the first 18 sessions, traders will be on the lookout for another volatile year.

Recession In ’19?

Recession seems to be on the top of many market participant lips, and for that reason alone it is probably not likely to occur anytime soon. And the retail group is certainly heavily influenced if one were to happen as GDP is comprised 2/3rds by consumer spending. I did read an interesting tweet by @DavidBCollum recently that said “In 1991, 51 economists were asked whether we would be in a recession that year. None said yes. We were already in one.” Could the weakness in some of the sector be saying so once again? I doubt it, but we know there were some alarming drops in retail names in ’18. Many are aware of the ineptitude of a name like JCP off 78% from most recent 52 week highs, and CLOSED below $1 on 12/27 and could be in jeopardy of a delisting in ’19. But stocks like TIF, BBY and PLCE all hovering in the 40% off most recent 52 week highs are surprising. Is this action showing a weak overall trend, or is it company specific? As always focus on the PRICE action, because no one really knows about the question referenced in the prior sentence.¬†

Examples:

The housing slump in 2018 was a big story and its affliction spread to a wide variety of subsectors within. The furnishing plays were hurt with LZB still 29% off most recent 52 week highs. LL, a lumber play trades 71% off most recent 52 week highs, now trades in the single digits. Below is the chart of WSM and how it appeared in our 12/4 Consumer Report. This stock has fallen 14 of the last 18 weeks and trades 32% off its most recent 52 week highs. The week ending 8/24 jumped more than 20% and looked well on its way to completing a long WEEKLY cup base trigger that began the week ending 8/21/15, and shows why investors should be very flexible as yesterdays leaders could quickly become tomorrows laggards (and why technical analysis can save investors fortunes). It filled in an upside gap from 11/15 on 12/3 at the round 60 number, and presently is finding support at the very round 50 figure.

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