Wednesday, September 25, 2013

Will Consumer Kill This Rally?

I have been worried about the health of U.S. consumer in the past month. I wonder around in different shopping centers on weekends, gathering my area's retail traffic, in order to predict the direction of the stock market. It does not look vibrant, to say the least. One may ask - why and how can a small town USA shopping center control the stock market? It can, because as a whole, America is a collage of densely populated shopping areas connected by the interstates. If you drive from one area to another you will find one retailer which is woven into the fabric of daily American life. The retailer I am talking about is Wal-Mart. This company can tell me about the state of the country. No, I am not exaggerating the power of lowest prices and their affect on consumers. Prices move inventory, period. Those who think that everything is fine with American consumer should take a quick look at WMT. I can't quite put my finger on what exactly is wrong at the moment, but the stock is telling me to be worried. So I am...

Here is something interesting that I saw when I plotted WMT over SPY and XRT. In September of 2012, WMT made a new high which was not confirmed by SPY and XRT. This time, in September of 2013, the picture is reversed.

Another interesting detail may be in the mix here. Last year, September FOMC meeting marked a dead high. Bernanke may be singing Britney Spears' song: "Oops!... I Did It Again". And yes, I can see that after some turbulence into mid-November, stock market resumed its march higher. Can we assume that everything is just fine, when WMT is making series of lower highs and lower lows? Only time will show...

click on chart to enlarge


  1. The better question is: will inflation kill the consumer?

  2. There is no inflation yet, but Ben & Co. are praying for one though... Here is my chart of commodity indexes: