The Russell 2000 ETF (IWM) is lagging again this morning while the S&P 500 is holding minor gains and the DJIA is in the red. Breadth is running just slightly positive but the number of new 12-month lows is over 350 and there are only about 40 new 12-month highs. There is some bounce action in select small caps but the FAANG names are struggling and trust levels are low.
The 20+ Year Treasury Bond Fund (TLT) is down again as interest rates continue to spike. This is the number one issue impacting the market right now and stocks are very unlikely to rally while interest rates continue to spike higher.
The S&P 500 is taking out intraday lows as I write. The early bounce buyers are not inclined to stick around when there is such limited momentum. There are a few small caps on the scans but this is very poor trading action for individual stocks. One chart setup that I like and added this morning was NII Holdings (NIHD) but it needs a close over $6 to attract interest.
Retailers have been under pressure lately and Costco Wholesale (COST) is not helping the sector. COST has some very loyal fans that love the stores but with the breakdown today they won't like the chart much.
COST reported EPS of $2.36 which is up 5% over last year and exceeds estimates by 2 cents, but an issue with its internal controls over information technology is a concern and is weighing on the stock. Management already has plans in place to fix the issue but it will take some time.
COST's biggest problem is that it has an aggressive valuation and needs to keep beating estimates by a substantial amount to please shareholders. The stock is trading with a trailing PE of 34 which means that 5% growth and a 2 cent beat just isn't going to excite new buyers. The company expects 13% EPS growth in the FYE August 2019, but if the numbers don't come up it is going to be hard for the stock to generate much momentum.
COST is a great store but it's an expensive stock, and after the move today it will have to deal with a broken chart as well.