Aside from the flash crash that resulted from the false AP tweet, it was a very positive day for the markets. The advances led the declines by a 3-1 margin and the NYSE A/D line has made new highs. The NYSE new highs are still lagging and are well below the early 2013 highs.
This suggests that the Dow Industrials and S&P 500 can make new highs for the year while the small caps should still lag. There were many positive surprises in the tech sector even though the earnings from Apple, Inc. (AAPL) after the close were disappointing. Additional earnings will be watched closely as further gains by tech are needed to suggest it could regain its leadership role.
One group that made new highs this month that appears to have already completed its correction is the broadline retailers. Last week, it looked as though the department stores were going to correct further before their major uptrends resumed. The action this week indicates that their correction is now likely over. We took some profits on our holdings in this sector and there are now two well-known names we are looking to buy.
Chart Analysis: The daily chart of the Spyder Trust (SPY) shows that it has rallied nicely after holding key support, line b, in the $153.40 area. Monday's close was above the 20-day EMA.
- There is next chart resistance in the $159-$159.71 area with the quarterly R1 resistance at $160.31.
- There is trend line resistance now in the $162 area, line a.
- The NYSE Advance/Decline line made new highs Tuesday as it overcame the resistance at line d.
- The A/D line has held its uptrend, line d, and is back above its WMA.
- The McClellan oscillator has formed a short-term positive divergence, line f.
- The oscillator broke its pattern of lower high, line e, in early April.
- There is initial support now at $155.70-$156 and then at $154.75.
The SPDR S&P Retail (XRT) hit a high of $73.39 on April 11, which was just above the quarterly R1 resistance at $72.85.
- In the five days after the highs, XRT dropped 5.5% but held the support in the $68.60 area.
- The quarterly pivot support is at $67.59.
- The daily relative performance did confirm the recent highs and is now trying to turn up from its WMA.
- The on-balance volume (OBV) broke through its downtrend, line j, in early April and made a new high with prices.
- The OBV has turned up from its WMA and the weekly OBV (not shown) is above its WMA.
- Once above the resistance in the $72.79-$73.39, the weekly starc+ band is at $75.27 with the quarterly R2 resistance is at $76.07.
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Macy's Inc. (M) has been one of the strongest department store stocks for many years as it is up 766% from its 2008 low. From the April 12 high at $45.39 it dropped 5.5% from the highs.
- Macy's tested its 20-day EMA for three days before gapping higher Tuesday.
- Once above the prior highs, the weekly starc+ band is at $46.85 with the quarterly R2 resistance at $46.83.
- The daily relative performance is now testing its rising WMA.
- The OBV has moved back above its WMA with the weekly and monthly OBV (not shown) also positive.
- There is initial support now at $43-$43.55 and then in the $42 area.
Dillard's, Inc. (DDS) is $3.8 billion department store that has also been very strong since the 2009 lows.
- Since November, DDS has traded in a broad range with a high of $89.98 and a low in February of $75.33 on a small earnings miss. It reports earnings next on May 6.
- The decline held the 50% retracement support from the July 2012 lows.
- The relative performance is trying to bottom out at long-term support, line f.
- A move in the RS line above its downtrend, line e, would be positive.
- The daily OBV has broken its downtrend, line g, and just recently tested its rising WMA.
- The strong close above the 20-EMA makes the next target at $81.41, which is the quarterly pivot level.
- Further resistance is now at $82.83 and then at $84.34.
- There is minor support at $79.50-80 with further in the $78 area.
What it Means: The impressive gains this week suggests that the strongest market sectors are going to make new highs. If the tech sector joins the party, then the current rally could last even longer.
The other possibility is that we will see a week or so rally to significant new highs before the sellers again come into the market.
How to Profit: Cancel the prior recommendation for Macy's Inc. (M) and go 50% long at $43.62 and 50% long at $43.16, with a stop at $41.88 (risk of approx. 3.5%).
For Dillard's, Inc. (DDS), go 50% long at $79.68 and 50% long at $79.26, with a stop at $77.29 (risk of approx. 2.7%). Cancel if not filled by May 3.
Portfolio Update: Should be 50% long Wal-Mart Stores Inc. (WMT) from $68.03 as sold half at $78.55 or better. Use a stop at $72.66.
Should be long Target Corporation (TGT) from $62.17 and sold half at $68.88. Use a stop now at $66.67.
From the December 18 column, went 50% long the SPDR S&P Retail ETF (XRT) at $62.74 and 50% long at $62.46. Recommended taking some profits at $67.92 and then more at $71.22 on April 16. Use a stop at $68.58.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.