If weakness is the new trend, Retail could be the leading edge
Quantitative easing is over. Quantitative tightening starts in October. These 4 charts could be signalling that Retail is the first segment to correct.
Chart #1 – This table shouts ‘Consumer’, ‘Retail’, ‘Household’
Is this a normal retracement or the start of something bigger? If weakness is the new trend, this could be the leading edge.
Chart #2 – Retail Sales YoY forecast to fall to 2.70 in 12 months
According to TradingEconomics,
Retail Sales YoY in the United States is expected to be 3.10 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Retail Sales YoY in the United States to stand at 2.70 in 12 months time.
Chart #3 – Contracting MoM
The ‘killer’ that is dragging down total performance in Retail Sales is the auto sales segment according to the US Census Bureau which released on 15 September the monthly sales for retail and food services for August 2017.
In a piece published on 19 September by CNBC, Moody’s Investor Service sees US auto sales shrink 3.6% and weakness to persist for 18 months.
Chart #4 – Consumer Staples XLP rising trend meets 15-month resistance
In my opinion, 3 out of 5 price features that define a high probability reversal pattern is visible in this chart of XLP – roadmap, resistance and chart pattern. The resistance here is prominent because of it’s 15 month duration. That spike in the last quarter that failed to break July 2016 top confirms the latter as the true resistance which also suggests that this year’s spike could be a blow-off top.
Maybe all of these signs are no big deal but it would be interesting alignment with FOMC’s announcement last night that quantitative tightening will start next month. Retail could be the leading edge of weakness here if there is going to be any correction.