#RetailStocks Review $XRT The Fate of The West Resides In An Economic Cycle

Retail Stocks Review

Trading noise, the random movement of price over the short term, does not control trends, cycles, and profits. The majority, an emotionally driven group focused solely on price, often interprets it as meaningful information. This leads to confusion, frustration, missed opportunities, and leaves the majority as the bag holders of trend transitions. The Evolution of the Trade helps investors stand separate from the majority.

US stocks’ overall trend, revealed by trends of price, leverage, and time, are defined and discussed in The Matrix for subscribers.

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The Fate of The West Resides In An Economic Cycle

The resiliency of the US consumer will be repeated a lot in 2024.

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Ignore the headlines and trading desk chatter. They do not reflect the intentions of the invisible hand. The failure to focus on the invisible hand leads to bad timing decisions.

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The Economy & Stock Report discusses US marginal economic activity through Economic Activity Composite (EAC) and its cycles.  The EAC, a time series constructed from real-time market data that does not get revised, influences every asset tracked in the PREV Matrix.

Stocks and numerous economically sensitive commodities, for example, typically decline during bear phases (see Chart 1 and Chart 2). Stocks can lag, while commodities can lead within these phases. Bear phases are marked by red highlight boxes. The red highlight box is driven by a well-defined cycle.

Chart 1:  EAC and S&P 500

Chart 2:  EAC and Commodities (CRB Index)

Headlines will continue to remind us about the resiliency of the US consumer. It’s a positive story that people want to hear. Meanwhile, the real economy continues to deteriorate rapidly. Our computer studies the economy (EAC) on multiple levels. Our EAC, an alternate and leading calculation of US marginal economic activity, reveals the extent of the deterioration (see Chart 3). An ITCO crash to the lower bound will seal the economy and West’s fate. The alternative EAC has our attention, and is only discussed in the E&S Report.   We encourage you to pay attention in 2024.

Chart 3: Alternative EAC

Retail stocks have been underperforming the stock market for 19 months (see Chart 4). Nearly 70% of national income (GDP) comes from private consumption, and roughly 50% of that comes from retail sales. The resiliency of the US consumer is a sale pitch. The US consumer is in trouble, but hey, let’s put our head down until it’s too late to react. The invisible hand is warning us.

Chart 4: S&P Retail Stocks and S&P 500

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Source: http://www.edegrootinsights.com/2024/08/retailstocks-review-xrt-fate-of-west.html