Retail's Not So Conspicuous Consumption

July 22, 2017

Mish's Daily

By Mish Schneider

blankFriday on Mish’s Market Minute Daily Facebook page, I introduced the second Modern Family cartoon character, Grandma Retail.

As the megatrend of online shopping increases exponentially, brick and mortar retail chains in malls have suffered.

Considering the price of Amazon’s stock is trading above $1000, Nordstrom’s in comparison, trades at $47.00.

That’s nearly half of its peak price in 2015 at $78.31.

Compare that to Amazon’s peak price in 2015 at $696.44!

If you look at the Directory in the picture (Mall of Conspicuous Consumption), many of the stores we see in malls throughout the country are anything but conspicuously consumed.

Perhaps the most dramatic example is J.C. Penney. In February 2008, the price of that stock peaked at 87.18.

Presently, JCP trades at $5.00. A heartbeat away from filing for bankruptcy.

Retail comprises 70% of the Gross Domestic Product in the US.

The Retail Sales reports reflect stats from 5000 retail outlets and food services.

In June, the number fell by .2%.

Grocery, department and hobby stores declined the most.

With the stock market at new record highs, can online sales resuscitate Granny Retail?

Given June’s decline, online retailers gained 10.1% over sales. The sector now makes up 12% of total retail sales.

That leaves 88% of the number still dependent on brick and mortar stores and restaurants.

Because of Granny’s angst, retailers are less likely to build new stores.

This will hurt commercial real estate, neighborhood shopping centers, and jobs.

Should we worry?

A robust economy will generate annual retail sales growth of 3 percent or more.

Spending at retailers has grown 2.8 percent over the past 12 months.

Amazingly, the overall market has ignored poor Granny thus far.

The overall market yes. The Federal Reserve?

They, in their quest to raise rates and reduce their balance sheet, will clearly watch retail numbers along with any impact it might have on employment statistics.

To date, rates remain at historical lows even with the modest increases since December 2015.

That continues to spur NASDAQ stocks, especially Amazon.

Furthermore, Sister Semiconductors and Big Brother Biotechnology also carry their share of the load.

How should you think about Granny?

Sweet little old lady wounded. She needs resuscitation, although she’s not dead yet.

If XRT can improve to a recovery phase, we can feel better about more upside in the overall market.

However, should Granny drag down Transportation, which in turn drags down Grampa Russell 2000 and so on, take heed.

***Friday at 5 PM EST on Mish’s Market Minute Daily Facebook page, I introduced Granny Retail. Check it out!

S&P 500 (SPY) 245 now pivotal. Maybe not a strong runaway gap, but small gap up held provided it doesn’t trade below 245.98

Russell 2000 (IWM) Backed away from the top of the channel top. More consolidation or the start of a failure? We need more evidence either way

Dow (DIA) Held 215 but closed under the fast-moving average.

Nasdaq (QQQ) 144 turned out pivotal on Friday. Will watch what happens here carefully

KRE (Regional Banks) Landed on the 50 DMA. Along with Granny and Transportation weakness, this could be ominous if breaks down further

SMH (Semiconductors) 86.68 pivotal area.

IYT (Transportation) Bounced back before hitting the 50-DMA. That means 168.60 important and back over 172.50 much better

IBB (Biotechnology) New 2017 highs-can see 330 next. Specs here which could be the blow off we need

XRT (Retail) Still bearish but holding 40.00

IYR (Real Estate) After three waves lower, should this clear back over 81.50 BUY! 79.00 support

XLU (Utilities) Money came back here as this goes to confirmed bullish

GLD (Gold Trust) Cleared 119. We’ve bought every dip in gold except this recent one-if good, should hold 117.25

SLV (Silver) 15.50 nearest pivotal support

GDX (Gold Miners) Has to clear 22.80

USO (US Oil Fund) confirmed bearish phase-

TAN (Solar Energy) Still looks Parabolic even with digestion

TLT (iShares 20+ Year Treasuries) Should this break 125, I’d think correction up over-but still strong for now

VXX (Volatility Index) No drama no fear

UUP (Dollar Bull) 24.18 the 200-week moving average

FXI (China) Digestion

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