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August 25, 2005
Blame Retail
The Retail HOLDRS (RTH) can be blamed for recent weakness in the broader market. This group is an important part of the Consumer Discretionary sector, which is the most prone to economic fluctuations. As such, it should be watched for early clues on economic strength or weakness.
RTH led the market higher in May, June and July with an impressive 20% move. This could be the back-to-school rush into retail. The stock peaked in late July and gapped lower in August. A falling flag has taken shape over the last 4 weeks and I would remain bearish as long as the upper trendline and resistance at 99 hold. The stock is approaching support and getting oversold, but a reversal is out of the question as long as 99 holds.
Posted by Arthur B. Hill at August 25, 2005 09:53 AM