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Area Man Discovers Best Buy... Isn't


Go ahead, pick your poison


Let's Make A Deal, one of the first gameshows devoted solely to the act of shopping and trading, was one of the most popular shows on television in the 1960s and 70s. It offered the supreme test of a bargain hunter's skill and nerves. What's behind curtain #1? Why, look, it's an electric turnip peeler. Congratulations! Would you like to trade that electric turnip peeler for what's behind curtain #2? No? No? Sure? Oh, too bad, you could have driven away in a brand new Ford Pinto. Great fun, eh? Let's Make A Deal was ultimately cancelled by Ebay visionaries Pierre Omidyar and Meg Whitman for obvious reasons. Ok, forget that. I just made that part up.

Anyway, we all see the 14% move today in Best Buy (BBY). So, is the Retail sector as a whole ready to run again, perhaps motivated by a BBY catalyst?

Despite the group hug today (and interestingly, I just heard someone on television say BBY sparked a broad based group rally), the important thing to note technically is that we are really just seeing the previous winners winning more, while the previous losers are mostly just hanging out. Today there were no net new buy signals in the group, and when we look at a chart of the Retail HOLDRs (RTH), we can see very clearly that so far all we've done is move closer to a key resistance level, not broken through it.

Retail HOLDRs (RTH)
Chart courtesy Dorsey, Wright & Associates

In somewhat related news, and bear with me, I really will tie all this together, we got a mailbag note today from a solid Minyan asking, "Why the sour grapes over the General Motors (GM) move?" While I'm not involved in GM... anymore, I will say it was, and still is, among the last two stocks (Fannie Mae (FNM) being the first of the two) that I would ever consider involvement in on the long side.

I believe GM has more than enough problems to stack unseen risk heavily to the downside, even with Mr. Kerkorian's $31 floor. But that's not sour grapes, it's just one man's view.

I guess the point is, with literally thousands of stocks available to trade in our universe, why not choose the ones that have the most ducks quacking?

Which brings me back to the Retail sector. Some stocks, such as BBY and TGT, have positive technicals, while others have charts that paint darker pictures. It's critical to be selective. The RTH, a basket of stocks, is almost by definition not selective, and the technicals show it.

No positions in stocks mentioned.

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