Global retail hints at tremendous season

Daily Analysis - 27/12/2017

Temporary trades in the holiday bound season offer opportunities

retail-sales


Early readings from a variety of unofficial sources (the US Retail Sales report for the month of December comes out on the 12th of January) are suggesting that the recent Christmas selling season was stupendous. Over 72% of the US gross domestic product (GDP), and approximately that amount in roughly equally service oriented advanced economies is generated by the retail industry. A stunning statistician itself. However when coupled with the fact that about 70% of the retail industry’s revenues are posted in the last month of the calendar year, i.e. almost 50% of the US GDP is generated during the holiday season.

Home Depot


A cursory look at the chart of Home Depot, if not taking your breath away will surely make you reach for the BUY button. And with excellent reason. In fact for two excellent reasons. First, in our opinion, is the representative nature of the stock. Representative, that is, of the retail industry as a whole. Home Depot (HD) is a DIY chain of outlets based in North America with stores in Europe too. But these are not ordinary stores. They are vast on a scale that, were you never to have wandered into one, would be hard to grasp. HD sells EVERYTHING a homeowner, handyperson, contractor or designer needs to refurbish, remodel or, indeed, build from scratch, a home. No less. Second by virtue of the sector that it serves it is a direct indicator of overall health of the housing industry, surely the US, but elsewhere as well. And the housing sector in the US is in ruddy health indeed. Last weeks’ housing stats paint a glowing picture of the state of the housing market in the US. HD piggy backs on to this trend.

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Marks & Spencer


The graph of the Marks and Spencer Group PLC is equally eye-watering. Adding to the scuttle about this year’s retail season, the graph clearly depicts a healthy reversal from a long downtrend. How long the upswing will last is anybody’s guess. We do not like to guess. There is enough uncertainty in this business as it is without adding to it. We go with what we can deduce with as high a percentage in favor of our decision as can be gleaned from the available facts. And we ain’t right all the time either. Make hay while the sun shines is as apt for the capital market trader as it is for the field crop farmer. When an opportunity presents itself to profit exploit it. Such opportunities are exploited by the quick and agile traders and the rest, the followers will erode the opportunity to non-existence quickly. Carpe diem.

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Silver


Silver has reached its highest level for the last two weeks or so. Generally there is an indirect correlation, meaning that one thing moves in the opposite direction from another thing, between the US dollar and Silver. Gold and silver perform largely identically so that what is generally true of gold will be true of silver, just that the numbers are lower for silver than gold. It is often called the poor man’s gold. The US dollar has shown weakness of late and maybe that is reflected in the price of silver. But again, are we academic theoreticians? Hardly. We are traders supporting ourselves and our families by exploiting the advantages the markets serve up to us daily. Silver is moving up smartly and we think it is a good opportunity to catch hold of during this holiday season low-volume bound period.

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The Deutscher Aktien Index (aka the German Stock Index DAX)


The DAX, which, like most of the worlds’ major stock indices are up for the last 18 months is experiencing a fairly sharp reversal which offers a good shorting opportunity. There has been some recent confidence shaking in the German markets following the indecisive election results as well as some recent economic sentiment reports that paint a slightly gloomier picture in among the deutsche Leute. Keep in mind that the sentiment reporting in Germany is among the best in the world as it more precise and more stable providing what are usually good signs of things to come in Germany certainly, but in Europe as a whole too. While global stock indices are at record levels. The party is coming to an end. Interest rates are SLOWLY rising and this will allow market participants to park more of their funds in sleepy, easy to manage bonds and savings instruments rather than fidgety stocks that require near constant contact with brokers. Still, as the chairman Chuck Prince of Citigroup, one of the greediest and egregious of the too big to fail crowd of money center banks is famously quoted having said, as long as the music keeps playing we will keep dancing.

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