Retailers are one of today's weakest sectors ahead of yet another batch of retail sales data tomorrow.
Retail Index Daily Chart
As concerns over consumer spending started to rise, the Retail Index (RLX.X) started to fall. The index failed to punch through resistance at 920, and is now below the 50-day moving average, and testing support at 877. If we get weak sales data tomorrow, or a string of poor earnings announcements this week, RLX could drop to test the next support level around 860. This area has the support of the 200-dma, 50% retracement level, and a 10-month up trend.
Wal-Mart Daily Chart
Much like the Retail Index, Wal-Mart (WMT) has sold off recently, and is getting ready to test support. The first support test is $52, the 38.2% retracement level. Just below are both the 50 and 200-day moving averages. $50 and $48 would have to support a more severe decline. With earnings due out before the bell, we shall soon find out which support level will need to hold.
J.C. Penny Daily Chart
Another retail stock due to report before the bell tomorrow is J.C. Penny (JCP). Sometime ago I pointed out that JCP was stuck at the bearish resistance line on its point and figure chart at $29 (not shown). Since then the stock has dipped, and today has dropped below support at $26.45. That sets up JCP to test the 50-day moving average, and then the 7-month up trend.
If these support levels can hold through this week's onslaught of news, perhaps retail stocks have a chance to hold on. If not it could spell trouble for retail stocks, consumer spending, and the overall economic climate.