It was a very quiet session Monday as expected though the Dow Industrials made further new all-time highs. Volume was light, and with the bond market closed, there was not an update on the 10-year T-note yields, which surged late last week.
As noted after Friday's close, the daily studies need further gains from the major averages and market internals to signal another strong rally phase. A daily close in the S&P futures above the 1775 level would be a positive sign. They are down slightly in early trading.
The department stores did well on Monday as most of the key stocks report earnings this week, starting with Dillard's Inc. (DDS), which most sources expected to report before today's opening but no information was available on the corporate home page. Macy's Inc. (M) reports on Wednesday with Kohl's Corp. (KSS) and Nordstrom Inc. (JWN) on Thursday.
A technical look at these department stores could provide some guidance on how they will react to earnings. The group has a positive seasonal tendency going into the end of the year.
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- XRT has continued to gain as it is up 1.8% this month.
- The weekly chart shows a series of higher highs with the weekly starc+ band at 3.9% above last week's close.
- The quarterly R1 resistance has been overcome with R2 resistance at $87.43.
- The daily and weekly RS are positive as the weekly has moved back above its WMA.
- The OBV made new highs last week and has been acting stronger than prices.
- The 20-week EMA has been providing good support (see arrows).
- The monthly pivot and first support is at $82.77 with the quarterly at $80.99.
Dillard's Inc. (DDS) dropped below its 20-day EMA Monday before reversing to close on the day's highs.
- Once above the October high at $85.09, the quarterly R1 is at $85.47.
- There is stronger resistance and the 61.8% retracement level in the $87.40 area.
- In May, DDS hit a high of $94.86.
- The relative performance broke its downtrend, line e, on October 17 and is very close to completing its bottom formation.
- The on-balance volume (OBV) moved above its WMA last month and is now testing its downtrend, line f.
- The weekly studies are very close to turning positive.
- The quarterly pivot and first support is now at $80.53 with further support at $79-$79.50.
- DDS did report strong earnings in the past two quarters.
Nordstrom Inc. (JWN) has had an impressive rally from the October low at $55.51 as it is up 11.4%.
- The daily downtrend, line a, was broken on October 18 and the close at $58.74 was above the quarterly pivot at $58.21.
- The close Tuesday was above the quarterly R1 at $61.08 with the July all-time high at $63.33.
- A weekly LCD was triggered the week after the high.
- The relative performance broke above its downtrend and its WMA in early October.
- The RS line is now in a solid uptrend and the weekly is also positive.
- The OBV surged higher by the middle of October as the downtrend, line c, was broken.
- There is initial support now in the $59.50-$60.50 area as JWN has had little in the way of a pullback since the daily HCD on October 10.
The four-month trading range in Kohl's Corp. (KSS), lines d and e, was completed on October 22.
- The high from 2009 is at $60.89 with the monthly projected pivot high (using John Person's method) is at $61.85.
- In April of 2007, KSS made a high of $79.55.
- The relative performance broke out to the upside in October as the resistance at line f, was overcome.
- The OBV had also been edging higher since August but surged at the end of October, moving through resistance at line g.
- The weekly technical studies are positive as the OBV tested its WMA in October.
- There is minor support now in the $56 area with the quarterly pivot at $52.14.
What It Means: It has been a tough earnings seasons as some stocks have rallied on bad earnings and others have dropped on good earnings. All three of these department stores seem to be under accumulation along with Macy's (M), which I have been trying to buy on a pullback.
How to Profit: For Dillard's Inc. (DDS), go 50% long at $82.38 with a stop at $79.47 (risk of 3.5%). Cancel if $84.90 is hit first. If long, raise the stop to $80.33 on a close above $85.10.
Portfolio Update: Should be 50% long Kohl's Corporation (KSS) at $52.37 and 50% long at $51.81, use a stop now at $53.77. Sell 1/3 at $59.22 or better.
Cancel prior order in Macy's Inc. (M) to go 50% long at $45.02 and 50% at $44.24, with a stop at $43.37
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.