Market Moves

The major market indexes fell lower today as they seemed to bounce off of a slightly declining line of resistance. The S&P 500 (SPX) closed mildly lower while the Nasdaq 100 (NDX) closed nearly 1% lower. The Dow Jones Industrial Average (DIA) also closed lower, and that result comes only two sessions after a high-range trading day marked by significant selling. As the charts below seem to indicate, nervous traders and investors are hesitant to buy at these historically high price levels. However, there is no evidence that the next few days will play out as the peak of 2019. In fact, there may be some evidence to the contrary.

So far, earnings announcements have been met with generally positive and even mildly optimistic responses. The retail and residential real estate sectors are surging, and now another industry group in the consumer discretionary sector, recreational vehicles, got a strong bump as two of its larger representative companies posted better-than-expected earnings results.

This kind of price action, selling repeatedly at a price level or trendline, is common in the markets. During strong bull markets, this kind of resistance becomes less and less pronounced over a period of weeks until price pushes above the line in dramatic fashion. A breakout of price closing above resistance often signals a resumption of the upward trend. With earnings season still yet to deliver its biggest news, that breakthrough could be close at hand.

S&P 500

Chart showing the performance of the S&P 500

Nasdaq 100

Chart showing the performance of the Nasdaq 100 index

Dow Jones Industrial Average

Chart showing the performance of the Dow Jones Industrial Average

Recreational Vehicle Sales Surprise Analysts, Investors

State Street Global Advisors' sector ETF for stocks that sell consumer discretionary items (think entertainment, services, and luxury items) tracks a wide variety of companies that provide goods and services for consumers looking to spend their time and money on various entertainments. This fund, the Consumer Discretionary Select Sector SPDR Fund (XLY), may provide a good benchmark to look at the industry group in the news today: recreational vehicles and goods. With the U.S. economy running at such low unemployment, and the influence of a strong dollar, consumers are buying more of what they may not necessarily need, but certainly do want: fun toys! 

This industry group has lagged behind the sector benchmark (XLY) but got a bump higher today as two companies: Harley-Davidson, Inc. (HOG) and Polaris Inc. (PII) posted earnings. The reports showed evidence that more than a few people bought motorcycles and jet-skis over the summer.  

Chart showing the performance of consumer discretionary stocks

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Winnebago Set for Earnings Report

Like other stocks in the consumer discretionary sector, Winnebago Industries, Inc. (WGO) has done well. Unlike most of the other stocks in that sector, however, it has surprised investors and nearly doubled in price from the start of the year. The company's earnings report is released tomorrow morning. Since the industry group is under a favorable light after the positive surprises from Harley Davidson and Polaris, Winnebago stock is poised to move significantly higher on good news. 

Chart showing the share price performance of Winnebago Industries, Inc. (WGO)

The Bottom Line

Stocks closed lower today as the indexes showed a pattern of price action that seems to indicate resistance selling going on at these price levels. However, the consumer discretionary sector showed some surprisingly upbeat news when companies that make recreational vehicles posted stronger-than-expected results. This sets all eyes on Winnebago, which reports earnings tomorrow.

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