RTH Retail ETF Weekly Chart; Overbot; Rising Wedge; Negative Divergence; Upper Band Violation in Progress

Market pundits continue touting the strength of the consumer and retail stocks. RTH prints a record high at 118.30 last week. Analysts proclaim a rosy picture ahead. The price move is phenomenal. Keystone's 80/20 Rule says 8's typically lead to 2's, and visa versa, so the breach of 80 in 2017 opened the door to 120-ish now. The 118, if it is sustained, should lead to 122, or, price may simply fall from 118.

That is two weeks of serious momentum so price may need a jog move for a couple weeks (down one week, up the following week and that is the top). The upper band is tapped at 118.66, almost, so the middle band at 111.77, and rising is on the table (do not discount a further touching of the 118-119 level over the coming days). Price is extended above its moving averages requiring a mean reversion lower. The stochastics are overbot agreeable to a pullback.

The chart is in universal negative divergence across the couple year time frame. Note a sliver of bull juice over the last month with the MACD line which may help price jog sideways for a week or two more. The chart is ugly. That red rising wedge is ominous since the collapses out of this pattern can be epic. Do not discount the possibility that price could fall into the 80's by year end or at the start of 2020.

The ADX indicates that the big-time rally this year is NOT a strong trend higher. Isn't that something. The charts are not impressed with the price move higher; it is occurring on happy fumes. The ADX was in a strong trend higher in late 2017 early 2018 but that petered out after the pullback. Then in September 2018, a year ago, the ADX started to sneak into territory that indicated a strong trend higher but alas, the market started crashing and down came RTH with the whole shooting match. Interestingly, during the Q4 drop of last year, the ADX was just about to indicate that the selling was a strong trend lower but alas, the Fed and other central banks panicked and colluded during the first week of January to goose global equities higher. That is telling to see the ADX way down at 12 considering the historic record-setting rally and new highs. It hints that this party should not last long.

The green Aroon line is at the ceiling at one hundo with nowhere to go but down. Look for a potential negative cross there during the weeks ahead. 

The RTH monthly chart is also in negative divergence but shows the strong price action higher over the last 3 to 5 months. It tagged its upper standard deviation band so 104 is on the table for the months ahead. The Aroon is pegged at 100 and the red line at zero designating an uber top in price on a monthly basis. The monthly chart may jog one month down another back up then rollover, so mixing the weekly and monthly together, RTH is printing its historic multi-month and multi-year top as the year ends like most other tickers. It can be shorted going forward.

If you are a longer-term investor, you can short RTH now, and then add to the short in 2 or 3 weeks, then add to it again 2 or 3 weeks after that and then sit on that short trade. By New Years and early 2020, you will likely be a happy camper. Keystone is not in RTH on the short side but likely will be going forward. It is interesting how the XRT retail stock ETF has been trending flat for the last five years while RTH goes to the moon.

The RTH ETF's major 10 holdings are; AMZN, HD, WMT, LOW, COST, TGT, CVS, TJX and WBA. RTH is riding the wings of Amazon, Home Depot, Wal-Mart that has now gone parabolic, ditto COST, TGT is straight vertical and TJX remains the retail superstar since all the ladies like the bargains there. It is easy to see why RTH is at a record high. King Bezos leads the way higher.

If RTH tops out and fails going forward as the above analysis indicates, that means the market darlings AMZN, HD and others would get punched in the face and kicked in the groin. 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 Saturday Morning, 10/26/19:  RTH slips -0.4% this week to 117.23 dropping to 115.87 during the week.