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[3 Must-See Charts] A Sucker’s Rally?

It’s been a noisy, back-and-forth week for the major averages full of traps for both the bulls and the bears.

Stocks shook off trade war worries once again yesterday to make up for Wednesday’s losses. The Dow Jones Industrial Average led the way with a gain of nearly 400 points, its biggest one-day move since April.

Will the market treat investors to some follow-through into the weekend? Or were the bulls fooled into buying a sucker’s rally?

Let’s check in on the charts to find out…

1. Discount retail shines

Walmart (NYSE:WMT) stole the spotlight yesterday after reporting a huge earnings beat that pushed shares higher by 10% on the day. The big-box retailer is proving it can hang with Amazon as its online sales jumped a whopping 40% during the quarter.

But Walmart isn’t the only traditional retailer holding its own during Amazon’s e-commerce onslaught.

Dollar General Corp. (NYSE:DG) quietly posted new all-time highs yesterday, officially ending more than six months of choppy trade. We’ve been bulled up on extreme discounters like DG for quite a while now, mainly because the chain tends to operate out of the reach of Amazon’s growing tentacles.

But Dollar General has also avoided going head-to-head with Walmart. The chain instead maintains a strategy to open stores in places not even Walmart will go, according to a recent piece in The Guardian.

dollar general

“The chain now has more outlets across the country than McDonald’s has restaurants, and its profits have surged past some of the grand old names of American retail,” The Guardian muses. “The company estimates that three-quarters of the population lives within five miles of one of its stores, which stock everything from groceries and household cleaners to clothes and tools.”

Judging by the big breakout we’re witnessing, Dollar General’s expansion plans aren’t going to slow down anytime soon.

2. Gold finds new lows

It’s been a difficult year for gold.

The Midas metal found itself in freefall once again this week as a strong dollar cratered gold futures to new 2018 lows.

gold

Following this week’s losses, gold futures have broken down below $1,200 for the first time since early 2017.

Back in May, we showed you how conditions were deteriorating for precious metals as gold snuck below $1,300 for the first time this year. At the time, higher treasury yields and a red-hot U.S. dollar were helping push gold lower.

But the herd remained bullish. Investors dumped $3.1 billion into gold ETFs just before the big slide in April, according to the Wall Street Journal. That marked the biggest rush into gold funds since February 2017.

“ETF buyers and other bulls have turned to gold as a traditional haven play during turbulent political times, with the prospect of a trade war still looming, uncertainty swirling around North Korea and tensions in Syria and Iran flaring up,” the Wall Street Journal reported earlier this year. “Some money managers are also using gold to hedge against a pickup in inflation signaled by recent consumer-price data.”

Using gold as a hedge just hasn’t worked so far this year. We’ll keep a close eye on precious metals in the days and weeks ahead to see where they finally bottom out…

3. Facebook takes another hit

Facebook Inc. (NASDAQ:FB) can’t catch a break.

The social media giant dropped nearly 20% following a brutal earnings miss late last month. As we unboxed the earnings story, we showed you how Facebook had developed a growth problem. That’s a major red flag — especially during a roaring bull market as most companies deal with the weight of high earnings expectations. For analysts and investors, it was clear that Facebook’s soft guidance for the remainder of the year was going to be an issue.

Despite the massive drop, Facebook shares appeared to have bottomed out. They even enjoyed a strong rally toward their June lows earlier this month.

This week hasn’t looked as bullish. Facebook stock dropped nearly 2.7% yesterday on an otherwise strong day for the market. It’s now threatening to test its post-earnings lows.

fb

I don’t like to see a bull market leader like Facebook trade in the red on a strong day for the market. If it breaks below $170, look out below!

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO, The Seven Figure Formula and Seven Figure Signals. Over the past decade, Greg has helped build the small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate, and countless other publications. Greg is a member of the CMT Association...

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