Stocks quoted in this article:
The S&P Retail Index (RLX - 905.3) is trading 1.1percent lower today. In contrast, after yesterday's surprise Fed rate cut, the index busted above its 20-unit monthly moving average for the first time in five months, rallying over seven percent on the day. In July 2000, the RLX moved below this trendline, proving to be in bear mode since the summer. It will be important for the RLX to close above this trendline for January's close to officially be considered back in bull status.
Interestingly enough, the retailing group reacted positively to reports in the last week of December about disappointing Christmas sales. Why this occurred is being attributed to yesterday's rate cut, as it appears the Street was beginning to factor this move into the sector.
Wal-Mart Stores (WMT - 57-1/2), a bellwether in the group, surged past potential call resistance at the 55 and 57-1/2 strike prices. However, it must now contend with the 60 strike, home of over 19,000 calls in the January series. Those that sold these calls to open positions would love to see WMT finish below 60 at January expiration so that they can pocket the premium.