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Nordstrom (JWN) The strongest department store stock in recent months has been Nordstrom (JWN). While it is near its all time high, and appears technically strong on the surface, JWN appears to have lost long-term momentum. The weekly RSI shows an apparent failure at the 70% level, and the major tops in JWN stock have occurred in progressively decreasing 14 week RSI. It is notable how the weekly volume appears relatively weak even though JWN has been forging all time highs. The run from single digits to over 42 within 3 years has been Google-like, and it wouldn’t surprise me if JWN’s faces a similar bearish fate soon.
Although the risk to reward ratio appears to favor the bears, a bearish position in Nordstrom would be extremely aggressive and require a tight stop above the all-time high. Count me out for now! While the luxury homebuilders have been laggards amongst the homebuilder stocks, the luxury retailers have actually led their sector. Something appears fundamentally amiss here. Federated Stores (FD) A move one step down on the luxury scale brings us to Federated Stores (FD) which is lagging Nordstrom recently. At the present time, it appears that FD has failed to make an all time high, and as with Nordstrom, there has been a loss in weekly momentum. It is notable that the intermediate to long term moving averages are all clustered within a couple of points of each other. This sometimes suggests a sharp move in one direction or another is eminent. (Note: The number of weeks used for illustrative moving averages were Fibonacci numbers for no significant reason except that they provide a good range of time frames.)
JC Penney (JCP) JC Penney shows characteristics of each of the two previous stocks, including progressively weaker weekly momentum which diverges from its stock performance. JCP also has tried to break into new high ground for 7 weeks and thus far, it has failed. The relatively low volume in recent weeks coupled with the meteoric 3 year rise in the stock is enough to make one wonder whether there is anyone left to buy the stock.
One more economic step lower on the food chain brings us to Sears Holdings – the company resulting from the combination of Sears with formerly bankrupt and then recovered, K-mart. As SHLD stock was going up, it was touted as a retail and real estate “play.” Such a rationale may now prove useful from the bearish side. The stock is now suspect as it is showing a loss of long term momentum. It is possible that its drop from 160 to below 120 was just for starters. There is support at 112 and resistance at 124 with clustered moving averages suggesting the start of a trend may begin soon. A decisive break above 124 negates any bearish rhetoric you may see hereon. The lower pane illustrates how SHLD has lagged Nordstrom since the spring of ’05.
Wal-Mart Generally speaking, Wal-Mart’s customers are those that benefit least from the artificially created “wealth effect,” and this clearly shows in the company’s stock performance which is in a long term downtrend unlike its upscale competitors.
A look at the long-term monthly chart is more ominous looking as the stock is less than 4 points from a key long-term support level.
Is the long-term support line the line of demarcation for the US consumer? Today’s Market The stock market put in a pretty ugly day as a morning rally turned sour in the late afternoon. By the close the Dow and Dow Transports were among the few US stock market indices that were up. The leading indices have been lagging over the past two days and this is typified in the comparison between the Dow Industrials versus the S&P mid-caps. This indicates that the market suddenly is taking on a defensive posture. Chalk up a distribution day.
Particularly weak were the internet stocks as Google was down another 2.8%, and Ebay was down over 2.3%. Google is highly oversold and some type of bounce is overdue; but a look at the daily close line chart shows that there is little in the way of support between Google’s present level (about $360) and $300/share. How the share price of Google responds to the inevitable positive press releases is important for the market in general. In its short history, Google has been silent with respect to financial guidance, therefore, with its way high valuation, this stock is a good indicator of speculator sentiment.
Oil stocks have once again taken a one-week long drubbing (so far). For my part, I felt lousy when I found out that my position in a Canadian Oil company was stopped out late last week; however, the subsequent action has shown once again, the importance of a well-placed and logical stop loss. It has been expensive for traders to ignore the point-and-figure chart of crude oil, which now suggests some more downside. A sell signal was triggered when Oil broke down to $65. Fundamentals aside, who is to say that similar action as natural gas cannot occur in oil? Certainly not me.
One small cap Canadian Oil stock that is acting particularly strong in the face of a tough market in oil stocks is Transglobe Energy Corp. (TGA), and it probably deserves a look when the correction in oil ends.
Gold’s correction may not be over and it may take awhile to heal from its Tuesday swoon, but so far the action has been positive and consistent with a wave 3 (or extended wave 5). To clarify my views, I think the HUI is in long-term wave 3 up (see last week’s wrap up), and gold is in long-term wave 5 up. Looking out into the intermediate term future, it seems that whenever the stock market appeared to be in peril, a drop in oil prices and a rally in the bond market would occur. These two happenings seemed to incite a rally in US consumer related stocks and the general market. So far, we have our drop in oil (and especially natural gas). Let’s see if the action in the stock market repeats. So far the consumer related stocks have not been acting well; and the lack in carry through in Best Buy (it was up over 8% today on good news), through the rest of the retail sector today appears to be ominous. All of the department stores referenced above were down today. Have a great evening. Martin Goldberg
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