The Trouble with Retail is That It's Full of Stocks

On the back of the Lowe's earnings selloff we noted yesterday we now have shares of Target getting body slammed by more this 22% as I write this after its own report this morning. Once again, all roads in equities lead to NVDA earnings tonight, as it is the largest firm by market cap in the world (over $3.5 trillion) and the premier momentum/growth name among large caps in the hottest segment of the market in years. 

That said, it is instructive to take a gander at the retail sector ETF, especially in light of the TGT move today. 

Indeed, just last week the XRT ETF printed multi-year highs, reaching the highest level in over two and a half years. Naturally, this brought out more and more calls from bulls expecting a broadening of the rally to send us much higher. And while that still may happen, the immediate fade is notable.

On the monthly XRT chart, updated below, you can see this November monthly candle (arrow) with a skinny shadow denoting a fade off the breakout attempt highs. This means the breakout did not initially hold. To add credence to this fade, we have a similar nasty fade in the XBI, ETF for smaller biotechs, immediately after bulls were galvanized for a rotation there, too. 

Beyond that, below the surface of the XRT we have some particularly bearish overall charts and action of late. Names like DG DLTR FIVE and Macy's just to list a few, and multi-quarter winners like ANF teetering on the edge of breakdowns themselves. 

Ultimately, just as with the broad market itself, the retail sector will come down to its steepest, strongest, most crowded names at the top of a bifurcated setup. Costco is the poster child for bifurcation in retail, but a name like TJX is up there now, too. We know the rest of the sector is in the basement or middling, at best. So now it is just a matter of when the crowded few crack.