It's Tough to Conquer Even Aging Empires

Bulls are feeling their oats again this morning, using the Bostic-led squeeze intraday yesterday afternoon to fuel a test of 4000 on the S&P 500 Index this morning. Rates on the 10-Year also dipped below 4% but are climbing back above that threshold as we speak. 

Without question, years and years of endless dip-buying being rewarded by easy monetary policies has become so entrenched in the modern Wall Street psyche with a sea of liquidity that even as The Fed has tightened in the last year or so it is taking its sweet old time to filter down to reality. 

On that note, another aging empire is Costco, which just reported earnings. 

The wholesale club store topped out about a full year ago and has since formed a series of rolling tops. I view the entirety of the pattern as a massive top and think, despite the green tape this morning, the COST earnings selloff may be just the beginning a roll downhill.

Ultimately, COST needs to lose $450 decisively (holding below it) to ignite a serious breakdown and confirmation of the major top. And that likely would be helped if the broad market cracks, too, which means on some level it is all one trade at this point.  

Be that as it may, the fact remains that COST is expensive, a maturing brand, has had over a decade of stock gains to discount future growth, and is now deteriorating technically as the consumer slowly but surely gets squeezed from inflation. I view the risk/reward as still skewing considerably lower the next few quarters.