(By Rich Bieglmeier) The Christmas shopping season has parked the sled at the North Pole, and Wall Street is throwing out retailer stocks with the wrapping paper and boxes. Consumer stocks aren't too far behind, their chart are tattered, strewn and next in-line for the round file.
Now that the return season is replacing the shopping season, it's clear Main Street and the malls weren't ringing the registers as briskly as hoped. In fact, it's been reported that 2012 spending was the lowest since the 2008 subprime crisis. iStock saw evidence of the Blue Christmas based on Google Trends and web traffic for 20 of the nation's retailers.
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Investors might consider avoiding the retail sector and watching consumer driven sectors and industries carefully in the days and weeks ahead; both look weak according to our sector performance review – see below.
Ah, but all is not lost. The number of sectors that fill the mature bull column swelled during the past week, and a number of new entries debuted on the emerging bull list. Autos and parts along with industrials have the appearance of continued strength. We especially appreciate the appearance of Semiconductor, Business Training, Steel, Chemicals, and Telecom Equipment sector charts. They give the impression of having the most upward thrust according to our take.
However, iStock would not be so aggressive around stocks given the political state of affairs. Who really knows how the fiscal cliff and all the pending tax hikes and spending cuts will impact stocks and the economy?
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What we do know is that stocks tend to be more volatile than sectors which tend to be more volatile than major indexes. Investors might consider using their money in a defensive way in an "anything can happen" market. It's fairly clear that retail stocks are set for underperformance relative to the S&P 500, so says iStock's technical analysis.
With that in mind, investors might consider shorting an exchange-traded-fund (ETF) such as SPDR S&P Retail (XRT) and buying an equal dollar amount of an S&P ETF like SPDR S&P 500 (SPY). If we are right in our assessment, as long as SPY outperforms XRT, no matter what stocks and politicos do, the trade will turn a profit, minus commissions, fees, margin interest… It could be a smart way to go with soooooo much uncertainty.
EMERGING BULL: Industries with positive technical analysis traits that are in the early stages, indicating possible above average returns in the near-term:
- Auto Parts
- Business Training
- Basic Materials
- Commercial Vehicles
- Telecom Equipment
- Real Estate
MATURE BULL: Industries that have outperformed and their charts suggest the above average returns could continue:
- Construction & Materials
- Specialty Chemicals
- Industrial Machinery
- Industrial Engineering
- Specialty Finance
- Heavy Construction
- Mid-Cap Value (looks solid, too)
MATURE BEAR: Industries that have underperformed and, based on their current chart patterns, could continue to lag:
- Integrated Oil
- Apparel Retail
- Specialty Retail
EMERGING BEAR: Industries that have fresh negative technical analysis set ups and could have sub-par performance in the weeks ahead:
- Medical Equipment (Obamacare casualty)
- Personal Products
- Food & Beverages
- Personal Household Goods
- Broadline Retail
- General Retailers