Cramer: Pinched Consumers? Technicals Say Otherwise
With the fiscal cliff looming, less than a month away, you'd think retail stocks would be performing miserably. But the price action is anything but miserable.
Conventional wisdom would suggest if we go over the cliff, Americans will find themselves strapped for cash.
"Think about it: tax rates go up, the payroll tax holiday goes away, unemployment benefits expire for millions of people, and that's not even accounting for all the lay-offs that will likely happen as the government cuts spending and businesses get more cautious," Cramer said.
You'd think it would be a sure fire recipe for disaster in retail stocks.
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But as it turns out – somebody forgot to tell the technicals.
According to analysis from Ed Ponsi, managing director of Barchetta Capital Management and a Cramer colleague at RealMoney the charts may be seeing something that the headlines seem to be missing.
Looking at charts of the the RTH, an ETF that tracks a basket of retailers , a number of patterns appear downright bullish.
- First of all, the ETF completed an almost perfect 50% pullback of its most recent rally, and a 50% retracement is one of those key levels where technicians think a security will often change course.
- The second thing has to do with the Moving Average Convergence Divergence indicator or MACD. This is a momentum indicator that's used to detect changes in a stock's trajectory before they happen. And on November 21st, Ponsi says that the MACD indicator gave you a classic buy signal.
- Also, through this whole period, the RTH has stayed above its 200-day moving average, a long-term measure of the ETF's trajectory and a positive sign.
- And a few days ago, the RTH crossed above its 50-day moving average, another bullish sign.
In other words, fiscal cliff be darned, the technicals suggest retail stocks are anything but challenged. And this market is trading very technically.
So what should you do?
Ponsi said he would own the RTH right here, and he'd add to his position if either 1) the RTH breaks out above $46 or 2) pulls back to around $45, a level he says should be support.
What's the bottom line?
"There are plenty of very real worries out there, especially the fiscal cliff, which concerns me greatly," said Cramer. "But even in this grim environment, you can still find entire sectors that are holding up better than you might think, and Ponsi's work with the RTH says the pullback in retail may be just the moment you want to pull the trigger on this key sector index."
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