RTH setting up as a nice short now.
Weekly Chart: Retail is setting up as a potential short play. Retail is a vital sector that provided the push higher for the broad markets over the last month or two. Note the rising wedge in blue, the overbot conditions and the negative divergence also shown by the blue lines. This created the May spank down and a potential head for an H&S pattern. Over the last couple weeks, price came back up near the prior highs but note the red lines that show no underlying strength justifies the higher price move. Over the last two months, however, note the green lines for RSI, MACD and stochastics. In this short time frame, these indicators want to see price make one more stab higher and likely create an M Top. This would be the entry area for a potential short play on retail. A gap exists at 111.0-111.5 and serves as an upside target as well as the recent high at 112.5.
The H&S pattern shows a neckline at 97.5 so the target area, should the neckline fail, is 82-83, also sturdy support and a gap fill at this area creating a confluence and providing the target some street cred. Watch to see if the RSI loses the 50% level as time ticks by. Projection is to enter short during a final stab upwards that will create an M Top. Lower prices are projected for the weeks and months ahead, which would also weaken the broad markets. The holiday sales reports will obviously impact the retail sector greatly. In addition to shorting RTH or other retail tickers, ETF's such as SZK and SCC are of interest on the long side although caution is warranted as these are thinly traded.
Daily Chart: Retail daily chart takes a closer look at the short term action. Note the blue lines show price trying to make new highs but the indicators show negative divergence for the moves, spanking it down each time. The exception is the green lines for the MACD line that wants to see a matching price high occur again. Note the red lines and circles. Price made a low during the August waterfall crash and the indicators fully supported this low print and in fact, the circles show that a test of this low is desired. In early October, the best price could do is come down to 99, that is not much of a test of the 94-ish low, so the door remains wide open for price to come back down to this area again.
Money flow and stochastics are below 50% which favors bears; watch to see if the RSI loses the 50% level which will be a sign of trouble for the retail sector. Projection is for some price buoyancy in the near term to satisfy the MACD line (green lines) and create an M Top. The forecast forward is lower prices targeting the 94-99 area.
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RTH and XRT Charts are Updated on this Eve of Retail Sales Data that hits 8:30 AM Tuesday, 3/13/12.
If retail plans to pull back it would start upon the data release in the morning.
RTH: Keystone remains negative on the retail sector this year but that does not stop the price from climbing. The rising blue wedges and negative divergence (red lines) should spank price down. Tomorrow we receive the Retail Sales data which may be a watershed event for markets. In May 2006, markets experienced a sharp sell off which was initiated by weak retail sales data.
The RSI and MACD line will want to see matching highs after a spank down occurs, so an M top would be a candidate moving forward. Note the severe drop off in volume as time moves along, price now moving up on vapor. Interestingly, the RTH received a stock split 3 for 1 in mid-February, this allows Ma and Pa, and Joe and Jane Sucka to enter the retail sector, as they lap up the daily media hype, and serve as the bag holders. The stock split made RTH more available to Ma and Pa at a cheaper price so the retail trader moved into retail stocks. The high gasoline price has to make an impact on retail sales as well. At 8:30 AM, with the Retail Sales data, we find out if they are the bag holders, or not. The chart shows a significant top forming for retail sector and roll over would be expected as the weeks play out.
XRT: The same analysis for RTH applies to XRT. XRT represents more of the mall type stocks while the RTH represents more of the big box stores such as WMT. Projection is the same as the RTH, spank down on tap, and potential M top roll over follows. The importance of the Retail Sales data 8:30 AM tomorrow morning cannot be understated.
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Time for another spank down.
RTH Weekly Chart Rising Wedge Overbot Negative Divergence:
RTH retail sector showing another nasty set up. The late October negative divergence set-up was a great short as RTH received its spank down. And now, with firm negative divergence in place (blue lines), overbot conditions that will need to be remedied, and the ominous rising wedge, it is once again time for retail to receive its punishment.
The three busiest shopping days of the year are Black Friday (the day after Thanksgiving), the Saturday before Christmas and today, and the day after Christmas. All three are history until next year. Retail typically tops in December. And with this current chart set up, it is time to play Taps again. One sliver of bull hope is the 20 MA sneaking back above the 50 MA so monitor this closely. Also the RSI 50% level.
Projection is a negative divergence smack down to occur. Retail is topping and rolling over. Expect sideways to sideways lower prices for weeks and months to come. Inverses such as SZK, SCC and dangerous RETS, and shorting XRT, or shorting individual retail names are all possibilties moving forward. Due diligence is required. The smack down will probably be similar to November where RTH fell from 113 to 106 (-6%) within two weeks.
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It is looking like this week should begin the retail sector slapdown.
RTH Weekly Chart Rising Wedge, Ovberbot, Negative Divergence, Hanging Man Candle:
The retail sector should put on quite a show this week. We watched the November negative divergence set-up that ushered in two weeks of great downside action. Here we are again. A two-year rising wedge, even a rising wedge over the six-month time frame. The stochastics are overbot. Negative divergence exists across this chart as shown by the blue lines for the indicators as well as on the daily chart. Last week prints a hanging man (red circle) which typically indicates a trend change, but you have to look for follow-thru verification this week.
Adding it all together, retail is ripe for a big fall. It should be spectacular to watch. Possible catalysts would be the Consumer Credit data at 3 PM today, or the NDN earnings tomorrow, but most importantly the Retail Sales numbers on Thursday morning. We may see rats exiting the sinking ship, er, store. Retail will be one of the most, if not the most, interesting sector to watch this week and the charts show that it is headed for a serious fall.
For RTH chart, use search box above for keystone speculator.
The spank down that lasted two weeks was fun. Now price came back up and is ready for another ride down.
RTH Weekly Chart Negative Divergence:
Beautiful negative divergence on weekly and daily RTH charts again. Keystone took the ride over the previous two-week down period, and here we are again. Retail typically tops early December on a seasonalilty basis which favors bears from a macro view. Nice area for short entries now or for entering the inverse ETF's for retail. The sled is loading up for another fun toboggan ride down the hill. Lower prices projected moving forward. The Black Friday and Cyber Monday hype long forgotten.
For RTH chart use search box above for keystone speculator.