Will Small Retailers Benefit From Latest Government Capital Infusion?

I wrapped up the Week In Review on Sunday morning with the promise of a universal attitude adjustment. “Obama hopes, I hope, we all hope.” Yesterday and today, the global equity markets are enjoying what I called the A-Team rally. This might not be April 15, 1912, and we might not be sailing on the SS Titanic, after all.

I have been pointing to the Retailers ($RLX +10.6%) and the Banks ($BKX +17.7%) as going to be the key to the market, and that the Obama A-Team would lead the way.

Yesterday, the Big 3US Bankers rallied hard, as the Daily charts show. C, JPM and BAC were up +57.*%, +21.4$% and +27.2% respectively. The Banking index was up +17.7%, so I was correct that the severe CDS problem was the key issue and that the A-Team, which we might now call the Reflation-Team, is the key. Debt monetization is unfortunately the only way to steer these ships through the ice-bergs.

But there is a long way to go yet. The Weekly charts, like the Dailies, show a cyclic reversal. The Monthlies show plenty of dangers still exist in these waters.

A good tool to use is the 6-month correlation tracker. I insert the ticker symbols for my target company and then take the correlated tickers and insert them into my charts, one at a time or by group. I look at Stochastics, RSI, and so forth. Being highly correlated, they ought to twist and turn (remember the market is a dance) in unison. You want to go with the flow or somebody is going to be stepping on your toe (or slipping their hands into your purses and wallets while you get jostled).

So, I look at groups that I expect to work in unison, in some fashion. Yesterday, I was expecting the Retailers to move with the banks because the banker’s credit lines are in fact the life lines for the Retailers.

Yesterday, the Retailers too started a comeback.

But there is a lot of caution. The consumer must still be convinced to do extra shopping at the Thanksgiving and Christmas, etc, holidays coming up.

Wal-Mart (WMT) named a new CEO a few days ago, which popped the stock then. So the market correction yesterday shows that profit-taking is still on the minds of the traders in the world’s biggest retailer.

While $RLX gained +10.6%, the top 12 capitalization-weighted retailers were up just +7.7% on average. The top 20 were up +8.5%, and the top 56 (my choices anyway since I made these calculations) were up +11.1%.

What this tells me is that many of the smaller retailers were the ones facing financial destruction if the banking system had sunk.

So I looked at the bottom 10 cap-weighted retailer stocks and saw them up an average of +9.8%. That list includes Dillards, Talbots, Pier 1 and Circuit City. Looking deeper; it’s clear to me which ones had been saved by the Citi bail-out. I don’t know this for a fact, but I will surmise that the biggest gainers have Citi bankers.

The biggest gainers on the day were Pier 1 Imports (PIR +53.9%), Williams-Sonoma (WSM +39.7%), Collective Brands (PSS +33.8%), Hot Topic (HTT +27.4%), Bon-Ton Stores (BONT +25.0%) and Nordstrom (+25.0%). If you have the time, maybe somebody could check.

This is the way traders have to think when they do their daily set-ups. Look for the relationships and follow the money flow. Newsletter writers talk about simple price drivers among the sectors and largest industries. But the pro traders dig into the details.

You have to trade real money against these people (me included). I know what it takes to win. There is no easy way for the relatively unsophisticated. You have to do the work.

But at the end of the day, you too one day will be calling the A-Team move and the Trade of the Generation. There is nothing special about me or what I do. It’s not rocket science. Just get serious and do the work.

If you are keen, insert the following list into the Google Portfolio function (see top right corner of the page), download the spreadsheet and sort and examine:

NYSE:GPS NYSE:ANF NASDAQ:URBN NYSE:ANN NYSE:LTD NASDAQ:BEBE NASDAQ:CACH NASDAQ:DBRN NYSE:IBI NYSE:TLB NASDAQ:CWTR NYSE:GES NYSE:BKE NASDAQ:PSUN NYSE:TWB NASDAQ:HOTT NYSE:KSS NYSE:DDS NYSE:JCP NASDAQ:SHLD NYSE:JWN NYSE:SKS NYSE:WMT NYSE:TGT NYSE:FDO NASDAQ:ROST NYSE:TJX NASDAQ:FRED NYSE:BJ NASDAQ:COST NYSE:HD NYSE:LOW NYSE:ETH NYSE:PIR NYSE:WSM NASDAQ:BBBY NYSE:CVS NYSE:WAG NYSE:RAD NYSE:KR NYSE:SWY NASDAQ:WFMI NYSE:BBY OTC:CCTYQ NYSE:RSH NYSE:PSS NASDAQ:AMZN NYSE:BKS NASDAQ:EBAY NASDAQ:SBUX NYSE:TIF NASDAQ:WMAR NASDAQ:DLTR NYSE:NDN NYSE:M NASDAQ:BONT

Yesterday, as hard as I tried, I didn’t make it into the ocean. As a cold front blew through Nassau, I wore a sweater all day and ended up working my usual 16 hours. Yes, I was forced to do the work, even when I promised myself I wouldn’t.

But today’s weather is “Scattered Clouds. High: 80° F. / 27° C. Wind East 6 mph. / 10 km/h.” Mostly sunny! Sounds like a plan.

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