Is Grandma Retail The Canary In The Coal Mine?

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Macy’s was the big loser, but it’s not the market’s biggest problem

Today's commentary was written by Geoff Bysshe, co-founder of MarketGauge.

The bulls will go home today hoping that the market over reacted (as it often does) to the ugly earnings reports in several retail companies. Macy’s, most notably, plunged 15%.

The market’s big problem isn’t Macy’s or even “the big box stores” getting slammed. If it were only the shares of those companies being punished because they blame AMZN has enable so many ways for the new companies to eat away at their market share, the market would be fine.

The big problem is consumer related stocks in general go hammered today (accept AMZN of course), and that’s a big problem for the bulls. It’s a big problem because that is indicative of a market that fears there is a problem with the consumer in general.

That’s another way of saying the dreaded “slower growth” phrase.

In a solid uptrend there are bad news days which can bring the market down hard, but the declines don’t last for many days. The market digests the bad news and looks forward.

As you’ll read below there are several sectors that held up well today (i.e. KRE and SMH), and some that are now in very precarious locations (i.e. XRT and IYT).

XRT may need to fall more and that would be ok, so long as IYT, SMH and KRE (to name a few) don’t move substantially lower. If these begin to slide, the markets’ 50 DMAs are in jeopardy, and that’s a big problem.

S&P 500 (SPY) The complete reversal of yesterday’s gains, and closing under yesterday’s low will put it back into a negative mode relative to the 10 DMA if it continues down tomorrow. Look for support at 206 and 205.

Russell 2000 (IWM) Like SPY, today is a negative pattern, but it’s sitting on the support at 111. Next level is 110.50.

Dow (DIA) Same story as SPY.

Nasdaq (QQQ) A down day, but better than the other 3 indexes. Held the expected support at 106.40. Next support is 105.50. This is sitting right under the 50 and 200 DMA so needs to clear them and 108 to be bullish.

XLF (Financials) Held up better than I would have expected with stocks downs and TLT’s up. Sitting in a support area. Next clear support level is 23.

KRE (Regional Banks) Still under the 10 DMA, but held up great today as it closed in the middle of yesterday’s range. If it can hold 39.20 it’s in an up move now.

SMH (Semiconductors) Closed at the low of the day but in the middle of yesterday’s range, so much better than the market. Look for support at 52 and 51.75. 53 is still likely to be resistance. Over 53 it could run up.

IYT (Transportation) The 10 and 50 DMA both came in at the same area and put a lid on it yesterday. Today it failed miserably. If it breaks its O.R. low below today’s low tomorrow, it could test the double bottom we’ve been watching all week. Needs to break over 140 before it looks good on the upside.

XRT (Retail) Yesterday’s note… “A quiet inside day on a day when the market was up nicely. Be careful if this breaks lower.” Today’s collapse came as a result of disappointing earnings in several companies. This is not good for XRT or the general market (as we saw today). 41.50 and 41 are areas of support. 42.40 is resistance.

IYR (Real Estate) Big down day even with TLT’s up. However, it’s still over its breakout level. Look for support at 78.30.

GLD (Gold Trust) Yesterday’s high was key as it gapped up, sold off to yesterday’s high, and then rallied back to close on the highs. Today’s range defines the key levels to break for a move in either direction.

SLV (Silver) Nice gap up and consolidation at the 16.50 resistance and 10 DMA.

GDX (Gold Miners) Followed GLD today.

USO (US Oil Fund) Nice move up after inventory data. 11.50 is the high to break then the 200 DMA is at 12.

XOP (Oil and Gas Exploration) Moved up with USO but couldn’t clear the resistance at the 34.60 area. Closed on the 10 DMA.

TAN (Guggenheim Solar Energy) Finally bounced but stopped dead at 22 level and closed at the low of the day.

TLT (iShares 20+ Year Treasuries) 3 days of tight consolidation led to the big move I’ve been waiting for. It was up. It stopped at 132 and at a trend line from the February highs. Look for support at 131. A break over 132 is a big breakout.

UUP (Dollar Bull) Finally a pull back. It held at a likely area, 28.30. Now if it rallies back over 24.45 further upside is likely