The Last Hurrah

The November through mid-December surge in retail stocks, seen below on the XRT sector ETF daily chart, certainly took me by surprise. As you can see, however, that rally has now been mostly erased. 

Further, long-term retail laggards like DG DLTR FL KSS NKE, among many others in the sector, continue to flounder. 

Overall, the XRT head and shoulders bearish top setup now has the look and feel of the late-2024 rally being the last hurrah for consumer discretionary/retail names. After all, we have sticky high inflation showing more signs of threatening to push higher yet as the bond market on the long end of the curve rebels against the recent Fed cutting cycle. 

High rates and inflation are almost assuredly too much of a burden for consumers given the slow-to-hire/slow-to-fire labor market which could easily see the latter part of that equation fall apart in 2025. 

The bottom line is that the crowded leaders at the top of the retail sector, COST TJX, should be ripe to finally crack this year given the above analysis.