APPAREL RETAILERS ARE HAVING A STRONG DAY -- TODAY'S RETAIL LEADERS ARE GAP, FOOT LOCKER, AND KOHLS -- CONSUMER DISCRETIONARY SPDR CONTINUES TO SHOW RELATIVE STRENGTH -- SO DO THE TRANSPORTS -- MICRON TECHNOLOGY LEADS CHIP STOCKS HIGHER
APPAREL RETAILERS ARE GETTING MORE EXPENSIVE... My message on Wednesday of last week showed the S&P Retail SPDR (XRT) hitting a four-month high and becoming a new market leader. Yesterday's message showed the XRT rebounding enough to stay above its recent breakout point. Retailers are continuing to show leadership today, with most of it coming from apparel retailers. The weekly bars in Chart 1 show the Dow Jones US Apparel Retailers Index breaking out to the highest level in three years. Its relative strength ratio (top box) is also turning up after after three years of underperformance. All of today's retail leaders in the consumer cyclical group come from that group and include Kohls, Gap, L Brands, Foot Locker, and Nordstrom. All of them are up at least 3% today. And are helping make consumer cyclicals one of the day's strongest sectors.
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Chart 1
GAP, FOOT LOCKER, AND KOHLS IN RALLY MODE... Chart 2 shows Gap (GPS) surging today to the highest level in two months. Its relative strength ratio (top box) is rising as well. Chart 3 shows Foot Locker (FL) rallying to the highest level in a month after clearing a falling trendline drawn over its January/April highs. Chart 4 shows Kohls (KSS) rising above its 50-day average today. That stock has been trading sideways since January and is the strongest of the three on relative strength grounds. Kohls has also outpaced the overall market since the start of the year. Two of the group's biggest leaders are Urban Outfitters (URBN) and TJX. The first of the two retail leaders is trading at the highest level in three years, while the second one has reached a new record
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Chart 2
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Chart 3
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Chart 4
CONSUMER DISCRETIONARY SPDR SHOWS RELATIVE STRENGTH... The daily bars in Chart 5 show the Consumer Discretionary SPDR (XLY) in positive territory today and trading at the highest level in two months. That's especially impressive considering that most other sectors are in the red today as is most of the stock market. The XLY is one of only three sectors in the black today. Industrials are getting a lift from a strong transportation group, while utilities are getting a boost from another drop in bond yields. The XLY is getting most of its strength today from retailers. The rising relative strength ratio (top box) shows the XLY doing better than the general market this year. The XLY is also the third strongest sector this year behind technology and energy.
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Chart 5
TRANSPORTS AND SEMICONDUCTORS ALSO SHOW LEADERSHIP... Two other market groups are showing leadership in the face of a soft market today. Chart 6 shows the Dow Jones Transportation Average trying to regain the upside breakout it achieved on Monday. Airlines and rails are its biggest gainers. Kansas City Southern (KSC) is its biggest percentage gainer. Semiconductors continue to show upside leadership as well. Chart 7 shows the PHLX Semiconductor iShares (SOXX) also gaining ground today in the face of a soft market. Chart 8 shows one of its strongest stocks -- Micron Technology (MU) --nearing a test of its March high. Stocks fell earlier today on the cancellation of the meeting with North Korea, but are making back most of those losses in late trading. No chart damage was done to major stock indexes on that morning selloff.
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Chart 6
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Chart 7
