Retail Fighting Back: Best Buy Reverses Gap Down

Best Buy had a decent quarter yet investors lit the stock aflame on weak guidance.  The gap was met with buying and buy lunchtime shares of Best Buy were back to even.  We are seeing other green shoots in retail today besides almighty Amazon.

My favorite slow retail names: WMT (long), KO, GM

Wishlist retail: LULU, KORS, AAPL

Avoid like the plague: GPRO, JWN, TGT

Futures are set to gap up over at the NASDAQ after a balanced session that featured normal range and volume.   Price managed to extend higher atop the strong up trend seen Wednesday. At 8:30am Philadelphia Fed data was stronger than expected and Initial/Continuing Jobless claims were worse than expected. The initial reaction is selling.

Also on the economic calendar today we have Leading Indicators at 10am. Energy traders will likely pay close attention to the natural gas storage data at 10:30am as temperatures continue to remain unseasonably warm.

Yesterday we printed a trend day up. Buyers were active ahead of the FOMC minutes, initiating risk, and their campaign continued after the 2pm announcement. The session ended with the market continuing to explore higher prices.

Heading into today my primary expectation is for sellers to push down into the overnight inventory and close the gap down to 4651.50. From there look for a move to take out overnight low 4547.50. Look for responsive buyers around 4641 and two way trade to ensue.

Hypo 2 sellers cannot close the overnight gap. Instead buyers step in at 4654 and work to take out overnight high 4674. From there buyers set their sights on the open gap up at 4702.50 before sellers are found and two way trade ensues.

Hypo 3 the market probes above overnight high 4674 and find little interest. Instead responsive sellers quickly knock price back into range and two way trade ensues that eventually fills the overnight gap down to 4651.50.

Levels:

Best Buy joined the growing list of retailers being hammered after posting earnings.  Despite putting up decent numbers, EPS of $0.36 Vs $0.35 estimate, the shares are down about -9% following a cautious outlook.

The company has a decent online presence but still operates expensive Amazon show rooms.  The bigger surprise would be a positive reaction to Best Buy earnings.  Retail continues to be a pressure point as we head into the holiday season.

Despite having a bad read on the FOMC reaction I managed to have a decent day. It helps we had a massive rally and my book is without hedge. Naturally I want more.

My largest positions do not put in work like these index moves, they just sort of sit on the sideline fawning the FANG prowess.

More importantly, and much to my chagrin, I missed a big win that Exodus served on a silver platter because the oh shit model had me bearish on Monday. NOTICE: henceforth said model signal will be named the Bunker Buster (h/t Uncle Buccs) and will not be interpreted as bearish. It has always occurred at-or-near lows so it will be considered a BONUS if Exodus already goes oversold.

BOOM: Solutions. We do not wallow in setbacks over here.

A clear P-shaped profile has developed ahead of the FOMC minutes.  This structure suggests a short squeeze is taking place.  Whether buyers initiate up here will tell us much about the afternoon.  For now, this up action is suspect of being a temporary phenomenon:

I probably should have just bought Amazon and called it a day.  But then again, a good friend of mine was beating that rhetoric into my head over a year ago and I ignored him.  Therefore, in my futile attempt at using my own brain I picked up two stocks that I will hold through this retail quell.

Yesterday, after posting stellar earnings and quarterly revenues over 100 BILLION dollars, I bought Walmart.

This morning, in the wake of a Singles Day blowout, I bought Alibaba.

Both positions constitute long term holds unless they completely deteriorate into muderholes like Go (fuck yourselves) Pro.

Now that I have affixed exposure to retail, I will head over to Amazon and start Christmas shopping o_0

For the second consecutive day the NASDAQ is coming into the session gap up. The globex session featured a slightly elevated range on normal volume. Price spent several hours grinding sideways along the low print set yesterday before a strong buying pushed entered early this morning. At 7am, MBA mortgage applications came in stronger than expected. Housing Starts at 8:30am was weaker than expected but Building Permits better.

Also on the economic calendar today is the Crude Oil inventory at 10:30am. Then we have the high impact FOMC minutes at 2pm this afternoon.

Yesterday we printed a neutral day. Price started the day out strong but sellers defended the low from last Thursday. As soon as we entered the Thursday range price formed an excess high. After some big chop, sellers prevailed and pressed through session low to print a neutral day.

Heading into today my primary expectation is for sellers to push into the overnight inventory and close the gap down to 4570.25. Look for buyers to step in and two way grind to ensue until we hear the FOMC minutes.

Hypo 2 buyers use the gap up to go higher. Price holds north of 4580 and buyers take out overnight high 4589.75 setting up a move to target 4616 before two way trade ensues.

Hypo 3 sellers close gap down to 4570.25 then take out overnight low 4556.25. The profile is thin down here. Look for sellers to accelerate down through the low and trigger a liquidation down to 4514.25 before two way trade ensues.

Levels:

Last week the New York attorney general told popular fantasy footballs gambling sites DraftKings and FanDuel to stop taking bets from the state.  Now Yahoo and their fantasy operations have come under scrutiny, per Reuters:

A probe by New York State’s attorney general into the fast-growing, multibillion-dollar daily fantasy sports industry has been expanded to include online media giant Yahoo Inc (YHOO.O), a person familiar with the matter said on Tuesday.

The move coincides with a court filing by Attorney General Eric Schneiderman on Tuesday seeking a temporary injunction that would shut down DraftKings and FanDuel, leaders among online companies offering paid-for daily fantasy sports contests.

Yahoo, which operates a daily fantasy sports site, was issued a subpoena by Schneiderman, the person familiar with the matter said. The company was not named in Schneiderman’s Tuesday filing.

Daily fantasy sports gaming “is nothing more than a rebranding of sports betting,” New York Attorney General Eric Schneiderman said in legal documents filed in a Manhattan trial court amid a widening probe. “It is plainly illegal.”

Fantasy football is worse than sports betting.  It is the dumbest pastime our country has ever encountered.  Spreadsheets, algorithms, funds, and time are all wasted on a crusty sofa in a campaign to be the ultimate football coach.

It is only a matter of time before the whole endeavor is banned and full grown men are sent back to the real world to play video games or gamble in the stocked market.

This earnings season we saw the Amazon effect pulverize tons of retail stocks.  The latest victim is DICKS.  All these stores are losing pricing power.  Investors have responded by rage buying AMZN shares.  Who else drives deflation and can thrive in an Amazon World?

The distribution center retailers.  Costco will succeed.  You shop inside their distribution centers.  What a twist!  Walmart will win.  They have a huge web presence and massive DCs.  Jeff Macke says Target should convert most of their stores into DCs if they want to be around in a decade.

Amazon will succeed.  They are leading the way in DC automation.  They are building a huge center in downtown Detroit and hardly hiring anyone.  EFFICIENCY!

I think Alibaba succeeds also.  This depends on the consumer falling in love with Ali Express.  Ali Express does not have the business-to-business feel of regular Alibaba, it sells China wares a la carte.  It is literally the Chinatown of the internet.  Every city has a Chinatown, why should the internet be any different?

I have not held share of BABA in a long time.  However, I know skepticism is high because last year they peaked out after Singles Day.  I like when sentiment like that resonates.  It helps me catch people flat footed.

I cannot chase Amazon; I can’t do it.  You do it.  But I like the idea of taking Walmart and Alibaba long term positions to expose myself to the major retail transition theme.

It was only a matter of time before the markets entered wait and see mode.  Sellers managed to erase the initiative gains buyers made this morning via brute force.  There was nothing tactful about it.  Sellers just started throwing heavier punches.

Their final heave around 2:30pm pushed the profile neutral and the rest was history, as they say.  we closed flat.  The day went nowhere whilst offering your boy tasty rotations to capitalize upon.

I expect to see more of the same tomorrow morning with resolve coming in the form of a certain 3rd reaction the afternoon FOMC minutes.

Good day good sir.