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Jim Farrish
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Jim Farrish is the Founder of Money Strategies Inc, a registered investment advisory firm. He has professionally managed money for nearly 30 years. His extensive research on the markets is published daily on his proprietary sites SectorExchange.com and TheETFexchange.com. His primary goal is to... More
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  • Watching the Retail Data 3 comments
    Mar 12, 2010 8:44 AM | about stocks: XRT

    The sector to start the current rally off the lows in February was Retail! It is fitting now, with the S&P 500 index, on the verge of breaking through the January high the same sector would announce data to make or break the move. The forecast has been lowered based on auto sales from the import data to 0% growth. A good number would be the potential springboard higher and a bad number could spell pullback. An in line number would be the perfect finish to the week of making it five boring trading days in a row!

    The chart below is XRT, SPDRs Retail ETF. As you can see we have been tracking this for some time now as the trading range was well established since October. The break from this range was bullish and the move higher has been well defined. Earnings have been the catalyst for the breakout along with guidance looking forward for more growth in the second quarter.

    We have hit our target on this play, but it looks ready to move higher. Today’s data could provide that catalyst to the upside. However, a bad number could trigger the stop currently at $39.15. My view is for more upside as the retail earnings continue to impress. The specialty retailers this week have continued the string of good news and upside for the sector.

    Watch and plan. Set your stops according to your risk tolerance and look for opportunities to add to this play on a pullback or establish a new position. Be disciplined and define your entry, stop and target before risking your money.



    Disclosure: Entered and hit target looking for move higher
    Themes: Retail Stocks: XRT
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    You're looking in the rear view mirror. The surprise has been that retail spending has held up as well as it has. But now the sector is wildly overbought and is pricing in a recovery that isn't there.
    - Stimulus spending has peaked; it's downhill from here.
    - Unemployment will remain high for far longer than people anticipate. Those jobs in construction, mortgage, manufacturing etc that have been lost in the downturn are gone for good.
    - Housing is not recovering. Supply is still way too high and will take years to work off.
    - Interest rates are headed up thanks to exploding supply of government debt.
    - Oil prices are strong and heading higher, a tax on the consumer.
    - Speaking of taxes, they're heading up, particularly on the wealthy.
    - Health care costs continue to spiral out of control, another "tax" on discretionary income.
    - Consumer balance sheets are a disaster. The savings rate is in the low-single digits. Consumers will need to retrench before long and start saving for retirement.
    - Event risk is not being priced in. 1. Greece may be "solved"...for the next week or two but the underlying stresses on the PIIGS are still there. 2. Then there's risk with Iran. Call me crazy but an attack on their nuclear facilities just might have a negative effect on the markets. 3. The budget situation in states like California (which is much larger than Greece, btw) are hopeless. Major tax increases and service cuts are just beginning even if there isn't an event like a failed muni auction.

    I am shorting the XRT pairing it with longs in other sectors and countries. XRT has momentum but the fundamental headwinds are of gale force strength. IT IS DIFFERENT THIS TIME.
    12 Mar 2010, 11:33 AM Reply Like
  •  
    Thanks for taking the time to comment, Sometimes objects are closer than they appear in those rearview mirrors... How is the short doing?
    9 Apr 2010, 09:18 AM Reply Like
  •  
    This is a fantastic recovery. ONLY 400k++ initial claims every single report. I'm sure doubling up here right near the all-time high will prove very profitable as the American consumer is unstoppable and momentum lasts forever.
    29 Apr 2010, 01:35 PM Reply Like
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