Economic Data Sets the Tone for the Day

The preliminary report from the Retail Association is that sales were down 3% this year versus last. That news is not helping the retail sector (XRT) which is slightly lower in trading today. The hope is that Cyber Monday will rescue Christmas sales. Amazon will be closely watched for clues relative to the online sales. The bigger question is will the sector stumble going forward or are there opportunities?

Looking at XRT, SPDR S&P Retail ETF there are 97 stocks in the sector. The leaders are where I would be looking for the best opportunities going forward. Over the last month JCP is up 34.6% and sitting on resistance at the $10.20 level.  A continuation of the move higher has room to run near term. Macy’s is up 14.3% during the same period and has been ordained as the winner for the big box retailers. filter through the sector and defining the winners or those stocks in a continued uptrend is worth the exercise as we move forward.

The other key data out today came from the ISM Manufacturing report which hit a two-year high today climbing to 57.3% from the 56.4% in October. This is a positive for the industrial stocks (XLI) which are up 12% off the October low. The other impact was to the bond sector as interest rates on the 10 year bond rose five basis point to 2.8% and IEF, iShares 7-10 Yr Treasury Bond ETF falling 0.6% to $101.10 which is the current support level for the ETF. The impact to industrials is expected… The impact on bonds? Yes, it would be expected as it points to the Fed being able to cut stimulus in December or January. The initial reaction was selling in both stocks and bonds. Stocks managed to work back to even on the day, but bonds held their losses.

Global manufacturing data showed a rise from 52.1% to 53.2% for November. The response in the EAFE index was a decline of 0.5% as fear of a cut in stimulus would hurt the progress globally. I would still watch the impact longer term as a positive for the economic growth of the global markets. The short term impact of less stimulus is smaller than the impact stronger growth in the economies. Still watching EFA and EEM moving forward.

Gold was the biggest loser on Monday dropping 2.5%. Why? Economic data improving, no inflation to speak of and the demand continues to erode. Simple case for the downtrend to remain in place near term. Look for some potential support at the $115 level for GLD. Otherwise the downside remains in play. The gold miners (GDX) was down 5.5% in response and our position short the miners was a big benefactor today.

Crude oil bounce back to $93.92 up 1.3% on the day. This the commodity back above the previous support at $93 and worth watching moving forward. The bounce may be nothing more followed by a continuation of the downtrend or it may offers some upside short term. Watching to see how much conviction the buyers have as the downside seems to be the direction of reason.

Overall interesting day as traders come back from the long weekend. This promises to be a telling week of trading with the economic data and ending the week on the jobs report for November. All positive… Fed starts to cut stimulus is the belief. That could cause some volatility in the markets depending on the data and conviction of investors. I am of the opinion and belief short term the buyers remain in control of the broad indexes.