The seasonality of retail stocks and the Retail HOLDRS (RTH) is now in a downward trend that ends in late January. If you are considering buying retail stocks in the RTH or the RTH itself, then wait until late January and you may get a bargain. Our charts this morning come courtesy of www.erlangerchartroom.com.

On January 30th, the seasonal downtrend ends. The above chart is the seasonal pattern. The magenta line is the seasonal direction. The blue and orange shadings off the magenta line are the best and worst periods to be long or short.

The heat map is the background coloring and we get some red in January. Seasonality is only a setup so if RTH and retail stocks buck the negative seasonal trend we would be embrace such a trend but so far that is not happening.

Only three stocks that make up the RTH have a strong Erlanger technical rank. All three are defensive plays in that they are a drug store and two grocery stocks.