Tuesday, November 26, 2013

U.S. retail sales still bullish

This week is shortened by the U.S. Thanksgiving holiday which will likely contribute to diminished trading volume as the week progresses.  Price movement is also likely to be relatively narrow and confined to recent highs and lows, although a push to a nominal new high in the Dow and S&P indices can’t be ruled out.  

The real action is likely to begin next week after the holiday when traders return to focus their full attention on the retail sales outlook for December.  The results of this year’s “Black Friday” week ending Nov. 30 will set the tone for next week….

Speaking of retail sales, here’s what our New Economy Index (NEI) looks like as of Friday, Nov. 22.  This index is a composite of the leading consumer retail and business service stocks – such as Amazon and FedEx – and is an accurate real-time reflection of the U.S. retail economy. 

As you can see, the NEI is at an all-time high as of last week which means the retail economy is still expanding.  NEI hasn’t given an economic “sell” signal since early 2010 and obviously won’t give another sell any time in the next few weeks.  Extrapolating the trend of this indicator suggests that the critical holiday shopping season will be a good one for retailers.  [Excerpted from the Nov. 25 issue of Momentum Strategies Report]