Chris Johnson

'Tis the Season for Retail Earnings

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If stocks are forward-looking, then someone expects good things for December. The SPDR S&P Retail Index (XRT) is up 25% and the Retail HOLDRs ETF (RTH) is up 16% since this time last week, which can't be based on anything more than hope. It's still too early to tell how the holiday season is going, although there were a few encouraging numbers coming out from Black Friday.

Looking at the discounts being thrown around, though (50% off all holiday decorations, including trees, before Christmas?!), retailers are bracing for a tough ride.

Yearning for an Earnings Play

Although earnings have hit a lull, there's one interesting earnings report coming later this week.

On the docket for earnings on Thursday is Costco (COST, which is a bit of a surprise … and not in a good way.

Given its position as appealing to value-conscious shoppers, the stock should be doing better. It's treading water versus the overall retail sector, which is disappointing. The stock is on a decent run off its November low, but the descending 50-day moving average looms overhead.

The biggest factor in COST's favor is sentiment, which is very negative. The put/call ratio is peaking at an annual high, and just one of 15 analysts rates the shares a "Buy." We'd feel better if the stock could take out its 50-day, and we have a few days to see whether that will happen.