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The stock sell off has stabilized, but e-commerce sales continue to fall. While brick and mortar retail sales grew 11% in the second quarter, e-commerce sales fell for the second straight quarter. Some of the decline can be attributed to the amount of e-commerce companies that have gone out of business, but traditional retailers have also been able to lure customers back into their stores. There were 7.5 billion e-commerce sales in the second quarter, but that was only 0.9% of total retail sales.

Internet Index Weekly Chart

The numbers suggest that e-commerce growth has stalled, and based on the performance of the Internet Index (INX.X), investors are betting its has peaked. The Internet Index is down 4.53% today, and 8 points below 1997 lows. On a relative strength basis, the Internet Index hasn't outperformed the S&P 500 since early 2000.

eBay Daily Chart

eBay had been the Internet standout, trumping the S&P 500 from April until July. When the stock lost support at $59 the picture changed as the stock dropped to $54. Somehow the stock is up today, but should have trouble moving above $55. A drop to $50 looks more likely under current market conditions.

Travelocity Daily Chart

Travelocity (TVLY) has also had a decent year, but is having an atrocious day, down 11.82%. That puts TVLY at a critical juncture. The 200-dma, 50% retracement, and yearlong up trend are all converging on the same area, and if Travelocity drops below $22.50, it should be in trouble. If the stock holds and rallies back up to $27, it would make for a lower risk entry point for shorting.

Jeffrey Canavan
Assistant Analyst

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