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Above the 40 (August 15, 2017) – The Retail Wreck Runs Over Strong Data

AT40 = 39.5% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 50.4% of stocks are trading above their respective 200DMAs
VIX = 12.0
Short-term Trading Call: bullish

Urban Outfitters (URBN) notwithstanding with its 19.5% after hours surge, Tuesday, August 15, 2017 was a signature day for the weakness engulfing retailing stocks. Despite my short-term bullish call for the S&P 500 and general stock market, I am devoting most of this Above the 40 post to the on-going ugliness that is retail.

Today was a “day of rest” from Monday’s fantastic and bullish rally. The S&P 500 (SPY) tried to rally but ended the day essentially flat – ditto with the tech-laden NASDAQ. The PowerShares QQQ Trust (QQQ) managed to end up on the green side of flat largely thanks to the 1.1% rally in Apple (AAPL) (I took this opportunity to lock in profits on my AAPL call options).

The S&P 500 (SPY) took a break from the previous day’s bullish gap up.
The NASDAQ also took a break.
The PowerShares QQQ Trust (QQQ) managed to stay in the green.

The volatility index gapped down but managed to hold onto its declining 200-day moving average (DMA). Still, the implosion from last week’s spike continued.

The volatility index (the VIX) continued its latest implosion.

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, confirmed the day of rest with its own pullback from 42.5% to 39.6%. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, closed at 50.4% which was below the previous 2017 low from May. So there remains a lingering longer-term concern emanting from this indicator.

Moving on to the big story of the day (for me), the SPDR S&P Retail ETF (XRT) dropped 2.7% to set a new 18-month low. Traders can be forgiven for missing the headline that retail sales jumped in July by the largest monthly percentage since the days of Christmas cheer.

Retail sales (excluding food services) put on its best monthly show of the year…
…but the economic data failed to do anything for SPDR S&P Retail ETF (XRT) which plunged to a fresh 18-month low.

The carnage in retail was widespread, starting with key names that reported earnings: Advanced Auto Parts (AAP) with a nasty 20.3% drop and a near 4-year closing low, Coach (COH) with a 15.2% decline that punctured 200DMA support, and Dick’s Sporting Goods (DKS) rounded out the disaster trio with a whopping 23.0% plunge that ended at the low of the day and a fresh SEVEN year low. Ouch. (Note I speculated on COH by first flipping shares for a small intraday profit and then ended the day with call options to play 200DMA support).

Advanced Auto Parts (AAP) continued the pain in the auto parts sector.
Coach (COH) was a rare retail comeback story until this earnings report.
Dick’s Sporting Goods (DKS) continued the pain in sporting gear. Has everyone stopped playing sports and hitting the outdoors?!?!

Target (TGT)
TGT took it on the chin for a 2.6% loss and a tempting test of its 50DMA. I recently bought shares for a longer-term play, but I like doing another short-term round of call options around these levels.

Target (TGT) has erased most of its gains from July’s strong guidance

Nordstrom (JWN)
I am surprised JWN has made no progress since news about the likelihood of the company going private. In last week’s sell-off, I looked the stock up and started a new position on the dip. There should be at least 10% potential upside from...