Wall Street analysts and strategists are touting the strength of the US consumer these days. The great American spender is supposed to carry the global economy through the expected soft-patch ahead. As is typically the case, the bull party is in full gear when such proclamations are made and now is no different.
RTH is a retail ETF that tracks many heavy-hitters including AMZN, HD, LOW, WMT, TGT, COST, CVS, WBA, TJX, SYY, ROST, DG, ORLY, MCK and JD.
Look at last week's big up week and the week before for that matter. Huge up weeks with traders and investors flocking into retail stocks expecting nothing but blue skies and rainbows ahead. Look at the volume; tepid. Volume is validation but the big up weeks late last month into this month cannot even overtake the negative volume from late July as markets began to tank. This hints that price is going to want to take a look at the 107.5-112.4 range again and at that time the bulls had better come with some big volume, otherwise, more ugliness will be on tap.
RTH has momentum. For gosh sakes, it gapped-up to begin this week. The candlestick is a hanging man indicative of a top but that will change as the week plays out. Price has tagged the upper standard deviation band so the middle band at 109.24, and rising, is in play. Price is extended far above its moving averages so a mean reversion lower is needed.
The red rising wedge is ominous since the collapses from these patterns can be quite dramatic. Do not be surprised that RTH drops into the 70's again over the next year or two. The stochastics are overbot agreeable to a pullback. The redlines show universal negative divergence across all indicators. RTH is topping out now but that momo has to be respected. It may take a few extra days or week or two to roll the puppy over.
The ADX is down to 13 so the big-time upside rally is NOT a strong trend higher. With such a robust move, the ADX should be at 30 or 40 to prove that the bullish trend is strong; it is not. The last strong trend higher was in early 2018 but that petered out over the last year. The Aroon green line is pegged at one hundo with nowhere to go but down. The Aroon red line is coming off zero with nowhere to go but up both indications are hinting at bearishness ahead.
Interestingly, the RTH monthly chart is in universal negative divergence across all indicators hinting at a significant long-term multi-month and multi-year top likely. The momo may help RTH remain buoyant for a few weeks or month or two but the chart is sad. The daily chart is also set up with negative divergence. RTH is likely topping-out now and will move sideways to sideways lower for months, perhaps years, to come.
Keystone is not in the retail sector now but short opportunities should be considered in all the tickers above going forward. Don't be a bag-holdin' fool. All the analysts and strategists, partying on one side of the boat, say the consumer will carry the economy going forward; they will likely capsize. Interestingly, considering the uber euphoric bullishness bestowed on the retail consumer, the potential fall from grace and collapse in retail sales data in the weeks ahead may be quite sudden and dramatic. Much of the spending these days is due to hoarding because of the ongoing US-China trade war drama. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 6:44 PM EST: Wheeeee. Whoopie! RTH gains another +0.1% printing a record high at 117.08. Traders are singing, "Happy Days Are Here Again" while drinking ECB champagne. The ETF still has a bit of momo. Investors say retail stocks are the easiest play and the great American consumer will never stop spending. Every day is one big party. Wheeeee. Whooopie! Most people do not understand how epic the stock market action is nowadays. Do not get caught up in the hype.
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