There are a good number of economic indicators that economists and analyst on CNBC reference when calling for a market reversal.  We all know the big ones like Consumer Sentiment, the Yield Curve, Unemployment, and GPD.  However, most of the time the ‘experts’ are late to the reversal or say “it’ll bounce back, buy here” as the market continues to tumble day after day.

Over the last few months, manufacturing and capital spending have both slowed largely do to trade uncertainty.  The strength in the U.S. economy continues to be the consumer.  Jobless claims and unemployment are low, and consumer confidence is strong.   The consumer data continues to kick the recession fears down the road as more eyes turn towards 2020.  However, I’m not so sure.  It feels like any negative consumer news – even if just a little – will roll over the equities market pretty quickly and I think it might be about to happen.  I base this unscientific opinion purely on women’s shopping patterns.  Yup, that’s it.

There are four stocks I watch to get a sense of women’s economic comfort.  They are EL, ULTA, NKE, and LULU.  You’ll notice that none of these are top luxury brands like Louis Vuitton or bargain stores like TJX.  The wealthy won’t feel the pain at the onset of a market downturn since they are flush with disposable income.  Also, those who shop at bargain stores will continue to do so and they already spend only when they can.  The most sensitive group to a downturn, initially, it’s the upper-middle class who shop and try to shop-up as often as they can.

[highlight_sc bg_color=#21c2f8 text_color=#ffffff border_color=]N.U.E.L.[/highlight_sc] started the year strong, but none of the stocks are currently above their July highs.  NKE, LULU and EL have all pulled back to mid-July levels, while ULTA fell off a tall building after reporting awful earnings in late August.  Was that a sign?  I think so.  Women love this store and it wasn’t long ago when you would regularly see huge lines at their counters.  Black Friday is right around the corner and it will mean everything for ULTA.

NKE is still one of the worlds most iconic brands and will likely be the last of the group to flash significant recession warning lights.  It’ll be extremely important to hear what they say during their next earnings report. My guess is that they will have a more overly cautious tone than the market expects.  A weakening consumer will drive the price down to the bottom of the horizontal channel – this will be an important pivot point and consumer strength indicator.

LULU has been a beast, but just experienced a down week and the CEO sold a chunk of his position.  Does he know something we don’t.  Lululemon is an aspirational brand. Everyone wants to own at least something displaying that little round logo and my guess is that LULU will be a good indicator of consumer stress.  If LULU drops slowly over the next few months headed into their Dec 9th earnings report, I’ll be short the consumer.

EL, my favorite in the group because of their many popular brands has pulled back to July levels and needs to show some strength soon or it might roll over. I’m watching the SMA50 and the horizontal line below to provide strength. If the market is rolling over these levels will be tested and tested hard. Watch them.

Let’s be clear – the market is still relatively strong and there was some encouraging data last week.  NUEL has not confirmed that the consumer is saving their money and spending less.  ULTA may have been that first shoe to fall – are we ready to accept it is we see the same out of the others?

I currently don’t own any of these positions, but will add long if we see buy strength AFTER a pullback.