The bifurcation that exists is all sectors may not be as profound as it is in the consumer space. While there are leaders in this arena with names like CMG, TGT or OLLI, there is a plethora of retail laggards. AEO, GIII and VFC are all off between 40-50% from most recent 52 week highs, and these were former respectable stocks. You can put two other laggards in the mix, both that had spinoff or takeover talk associated with them. It is a good example of why to make all trading decisions based on PRICE action, because each of these names displayed weakness in the technicals BEFORE the fundamentals. JWN has long been rumored to be taken private, and it may happen, but GPS is now looking at a SEVEN week losing streak, after an announcement on 3/1 to spinoff Old Navy. How much lower will it go when the Banana Republic disclosure to trade on its own is made, of course this statement is pure hyperbole.
Climbing The Ladder:
The old adage goes it is harder to remain at the top, than actually getting there. The thought is once the peak is achieved many are gunning for you. Below is the ratio chart comparing Under Armour to best in breed European play. It has some positive aspects to admire, as it recently retested a bullish trend line break. The reason for our “climbing the ladder” reference that is is difficult to ascend to the top as well. Recently we highlighted a ratio chart comparing UAA:NKE in our 5/31 Consumer Report and that has indeed continued to follow through. UAA is now at 52 week highs, while NKE swims 7% off its own one year highs. The footwear play still has other mountains to climb including DECK, which is higher by 10% this week. The treads are going to be worn out on the journey toward the summit, pun intended.
When sizing up peers within a group it is always interesting to see how they compare. We are a big fan of ratio charts, and although on the chart below we can see how HD fared against the overall consumer discretionary space (HD is now 6% off most recent 52 week highs, while LOW is 17% off most recent peaks). Below is the example of it, and how it appeared in our 6/5 Consumer Sector Report. It did indeed burst above its 50 day SMA this week, and today recorded its first CLOSE above the very round 200 number, after being rejected there between Monday-Wednesday. Watch now for a potential breakout above a cup base pivot of 208.40 in the near term.