Ride the Retail Wave


As you wrap up your Christmas shopping, don’t forget to buy some gifts for your portfolio. MoneyShow’s Tom Aspray suggests potential stocking stuffers in the retail sector.

The action Monday was quite strong as advancing stocks led the decliners by a two to one margin. The NYSE and S&P 500 Advance/Decline lines have turned higher from support indicating that the correction is over. The leading action of the NYSE A/D line this fall was positive for the intermediate term.

The movement on the fiscal cliff debate suggests some kind of deal will be put together, and if it includes a year-long extension on the debt ceiling, it may help spur new corporate investment. The financial stocks were strong Monday as the Select Sector SPDR Financial (XLF) has been the best performing select sector ETF this year.

The second best performing sector in 2012 has been the Consumer Discretionary sector, which includes the retail stocks. There are positive signs from both a leading retail ETF and several retail stocks that they are ready to finish 2012 on a strong note.

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Chart Analysis: The SPDR S&P Retail ETF (XRT) is up 20% so far in 2012 versus a 15.9% gain in the Spyder Trust (SPY).

  • XRT came close to the 61.8% Fibonacci retracement support from the June lows at $59.52 in November as the low was 59.58.

  • The recent pullback reached the quarterly pivot at $61.75 on Friday and closed strong Monday.

  • The daily downtrend and next resistance is in the $63.56-$63.76 area.

  • A close above this level will complete the correction and signal a move to the 127.2% Fibonacci retracement target at $67.02.

  • The relative performance broke its downtrend, line b, in early November, which confirmed its uptrend,
    line c.

  • The RS line has turned up after testing this support.

  • The daily OBV is now testing support at line e, but needs to move back above its WMA and then resistance (line d) to confirm a new buy signal.

Macy’s Inc. (M) has been in a broad, upward sloping trading range since the latter part of August with resistance at line f.