Retail stocks are beginning to stabilize following a recent correction, with the SPDR S&P Retail ETF (XRT) showing improving short-term momentum and a potential oversold upturn. This suggests a possible short-term relief rally within a longer-term uptrend, particularly if XRT can surpass the 200-day moving average near $86.
However, retail stocks have underperformed compared to the S&P 500 Index (SPX) both in the short and long term, with the relative performance ratio testing support from its September low. Despite this, signs of short-term downside exhaustion may lead to a temporary recovery in relative strength for retail stocks.
Amazon.com (AMZN) is highlighted as a retail leader with a positive long-term outlook, supported by its rising weekly cloud model, and is expected to potentially retest highs near $280. In contrast, Home Depot (HD), which has struggled recently, is showing signs of improvement this month after a significant decline in August and September.
Although HD is trading below its declining 200-day moving average, indications of downside exhaustion following its recent sell-off suggest a possible counter-trend rebound. Katie Stockton, Founder and Managing Partner of Fairlead Strategies, provides this analysis, emphasizing the potential for a recovery in the retail sector