Summary
Here's a shock: Sears Holdings Corporation (NASDAQ:SHLD) declared bankruptcy.
A new study shows that post-recession economic growth is centered on urban areas with highly educated people.
It looks like the markets could be stabilizing.
To absolutely no one’s surprise, Sears has finally filed for bankruptcy. Why this didn’t happen sooner is utterly beyond me; they’ve been circling the drain for the better part of the last 15 years. I have not analyzed their finances in some time, but the last time I did they were an utter disaster: declining revenues, diminished cash flow, and heavy reliance on debt financing. All that’s left at this point is separating the company’s real estate holdings from the parent company and selling off what's left for pennies on the dollar. If you happen to like art deco real estate, go by your old neighborhood Sears stores now; they’re bound to be torn down within the next few years.
As regular readers know, I am keeping a close eye on Brexit negotiations. My main concern is a “hard Brexit,” were the trade relationship between the UK and the EU radically changes overnight - a situation tailor-made for economic disruption. Negotiators are currently stuck on the question of the Irish border, which will be the only physical border between the two regions after Brexit. There is concern of a return to a “hard border” – a border manned by some official force. This would harken back to the days of the “Troubles,” when the IRA would routinely target border forces. While no one wants a return to this type of arrangement, the sides have yet to agree on how to deal with the Northern Ireland-Ireland border.
This study from the Economic Innovation Group explains a great deal about the recovery. And this map really shows the key issue we have to deal with:
Almost all the major growth has occurred in large cities that are highly educated. Other regions - above in tan - have low businesses. Read the whole report; you'll be glad you did.
Let's look at today's performance chart:
There's a little something above for everyone. The bears can point to the sharp sell-off in the Invesco QQQ Trust Series 1 (NASDAQ:QQQ) and the modest decline in the SPDR S&P 500 (NYSE:SPY) while the bulls can argue that the modest performance of the mid- and small-caps is good news.
Right now, the central question for market observers and participants is, “is the sell-off over or are we still moving lower?” While we don’t have a definitive answer, today’s price action indicates the selling might be over.
Let's turn to the charts, starting with the 2-week, 15-minute charts:
The iShares Russell 2000 (NYSE:IWM) was in a solid downtrend at the end of last week, which prices broke through today. The only negative was the sell-off at the end of trading.
The SPY (NYSE:SPY) is consolidating in a rising wedge pattern ...
... while the QQQ is moving sideways.
All three of these charts imply a bottoming.
Turning to the daily charts, we're starting to see some positive developments in the QQQ and SPY charts:
Both the SPY (top) and QQQ (bottom) are clustering prices right above the 200-day EMA. Volume has settled down a bit.
The IWM is clustering around the 38.2% Fib level.
Does this mean the selling is over? No. Prices could collapse tomorrow for all we know. But the clustering around key technical levels is a very positive development as is the declining volume. Things are moving in the right direction.
Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.