RETAIL BUYING AND ENERGY SELLING GIVE MARKET A BOOST -- S&P 500 BOUNCES OFF 200 DAY AVERAGE
RETAIL HOLDERS RISE ON VOLUME... A nice rebound in retail stocks gave a market a boost today. It came at a good time with major stock indexes like the S&P 500 bouncing off their 200-moving averages. At the same time, a $1.00 drop in crude oil and selling in energy shares lent some needed market support. One of the top ETFs of the day was the AMEX Retail Holders shown in Chart 1. Today's price bar shows an impressive rebound which took place on rising volume. Three of the biggest volume bars over the last two weeks are green, meaning that they took place on up days. Although the RTH is trading under its 200-day moving average, it is finding chart support along its December low. One of the biggest holdings in the ETF -- and one of today's biggest gainers -- was Home Depot.
Chart 1
HOME DEPOT GAPS UP ON VOLUME... HD was a standpoint performer in the retail group today. Its daily chart shows the retail leader gapping to a two-week high on impressive volume. Its relative strength line, which has been dropping, also showed signs of turning higher. The daily chart also shows HD finding chart support along its December low. Its weekly chart, however, puts the recent action in better perspective. Chart 3 paints a picture of a stock testing the bottom if a seven-month trading range where new support can be expected. Its weekly stochastic lines are turning positive from beneath the oversold 20 level. That's the first time that indicator has given an oversold reading since the start of 2003. Other retailers that turned in a strong day were Dillards, JC Penney, and Staples.
Chart 2
Chart 3
ENERGY STOCKS DROP ... One of the reasons given for recent weakness in retail stocks is rising energy prices. It may be no coincidence then that on a day when retailers were strong, energy was the weakest sector. Crude oil prices fell $1.00 today. At the same time, the AMEX Energy Select Sector SPDR closed back under its 50-day average. The four biggest percentage losers in the S&P 500 were energy stocks. The weakest part of the energy patch are oil service stocks. The AMEX Oil Svc Holders were among the weakest ETFs in today's trading. Since commodity-related stocks often lead the commodity, today's selling in the energy sector may be hinting at more weakness in crude oil. That would give the rest of the market a much-needed boost.
Chart 4
Chart 5
S&P BOUNCES OFF 200-DAY LINE... Today's market rebound came at a good time. That's because the S&P 500 has been testing its 200-day moving average. Yesterday's price drop marked the second successful test of that long-term support line in the last week. Unfortunately, however, volume was light. Other stock indexes that bounced off their 200-day lines are the NYSE Index, the Morgan Stanley Cyclicals Index, and the Biotech Index. [Please see midday update for charts of those three indexes].
Chart 6
