PG, WMT Technical Analysis

Click on Charts to Enlarge

The top chart above is Wal-Mart and the bottom chart is Proctor & Gamble. Both companies represent basic consumer spending and demand for everyday, non-luxury type products.

Looking at the charts of these companies you can see the extreme similarity in the price charts with respect to the timing of the highs and the rising wedge formation that has followed the recent severe price decline. What is not visible on the chart is the long-term context of the recent declines. PG has shown such a severe price correction that under cut the last major consolidation of the prior bull market, that it virtually gaurantees that this stock is headed substantially lower.

My analysis of the rising wedge pattern, which is actually a type of triangle pattern, is that there is likely to be one more high (likely this week) above the highs of Nov 4. Many of the same concepts that I mentioned in regards to NSC a week or so ago, apply to PG. There has been a high momentum rally (momentum indicator peak higher than any peak in years in this case) after the first obvious break of the bull market trend. The stock is rising underneath its 50 and 200 day moving averages which are likely "failed breakout" points over the coming days. I think there will soon be a great short-selling or put option trade entry point in this stock.

Almost all of the same comments apply on WMT technically though the long term context is a bit different.

Now is there any larger message that can be gleaned from looking at the charts? WMT is the biggest retailer in the world. The chart suggests future (long-term) weakness in the stock. I believe that this also tells us that consumer spending is going to be greatly slowing, even more than it already has, in the coming months/years. Stock prices are leading indicators of economic conditions as the future expectation/realization is very quickly priced into the stock, while it takes months or years of data to actually prove the point. With basic household goods companies showing severe weakness, we should expect a major downturn in the economy.

Pete