Discounting The Future
Market performance leads economic
performance. We see it in the business cycle. Perhaps we’re also seeing it now
in the sectors.
The government today reported that
retail sales came in essentially flat in December despite the Christmas holiday
shopping season, and merchandise-store sales lost 0.8%, the worst decline since
a 1.1% decline October 1995.
Market response: The S&P Retail
Index
(
$RLX.X |
Quote |
Chart |
News |
PowerRating) rallied and moved ahead 1.1%.
Near term, all the rate-sensitive
stocks, including the retailers, run the risk of hitting air pockets. And some
of these retailers have got ahead of themselves. But we’re at the beginning
stages of a monetary expansion, a long-term bullish factor for the sector as
well as for the financials.
Being in
the right sector, however, is only part of the game. You still need stock
selection, timing skills and money management. What is acting well right now
among the rate sensitives?
Ethan
Allen Interiors
(
ETH |
Quote |
Chart |
News |
PowerRating) moved ahead 1 3/16 to a new 52-week high of 35 on
nearly three times its usual activity. Note the recent pullback on contracting
volume and upward-sloping relative strength line.
Lehman
Brothers
(
LEH |
Quote |
Chart |
News |
PowerRating), which provided a handle-breakout
entry on Jan. 3, is forming a higher handle within the same base and just below
new high ground.
The top field of all stock charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.