Chris Johnson and Jon Lewis

Is Retail a Buy?

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Earnings news hits the skids next week. Only 18 S&P 500 (SPX) companies are on the schedule, a far cry from the activity of the past three weeks. 

However, one sector will clearly be in the crosshairs with several major names reporting. Since I already spilled the beans in the title, you know I'm talking about retail, which has big-hitters Macy's (M), Kohl's (KSS), Nordstrom (JWN), Wal-Mart (WMT), Abercrombie and Fitch (ANF), and JC Penney (JCP) all stepping into the confessional.

The SPDR S&P Retail ETF (XRT) is showing signs of reversing higher.

Note in the chart below how XRT has spent this week bottoming out at its 50-day moving average, a trendline that helped the shares in early October. The ETF is up around 33% off its July bottom. (By the way, you think XRT might be a sell when it hits $37? Hey, I'm just asking.)

Three of XRT's top 10 holdings report next week -- Nordstrom, Priceline.com (PCLN), and Urban Outfitters (URBN). But expect the other S&P names to also hold sway over the sector, especially with the critical holiday season looming. 

Friday's jobs report probably will have an impact on retail, since the two are so closely linked. Keeping the unemployment rate below 10% should help. Anything in double digits, though, will probably blow the 50-day support right out of the water.

I mentioned the six S&P retailers reporting next week above. Which stock is the best of the bunch? Well, I know which one isn't -- Wal-Mart.

This stock is a disaster, and it's down nearly 10% for the year and is one of the worst performers in the Dow (DJI).