Costco is Speaking to Me

• Posted by Greg Harmon
• on July 15th, 2014

Every trader or investor has barometers that they use to measure the health of the stock market. You hear ‘only price pays’ from trend followers and chart masters. Some others like to use momentum indicators or price patterns. Fundamental investors talk of PE multiples. And others use relative strength to try to gain an edge. But outside of those tools many also just look at a handful of stocks to get a feel, totally unscientifically, on the health of the market. One of those for me is Costco, $COST. My family is there every week at least once and it is always humming with activity. But the stock price does not always hum. This is where the market tell part comes in. When Costco stock is running the market feels good and is running too. They may not start at the same time but when they are both moving things are good.

Well it appears that Costco’s stock price is about to signal a new bull run. You can see in the simple chart above that after a move higher from the long consolidation in 2010 it rose to a peak around Thanksgiving last year. This started a few months after the broad market began higher in 2009. Since then it pulled back and moved sideways. Do you know anything else that ran higher from 2010 and leveled to start the first several months of the year? Maybe the S&P 500? With the S&P 500 moving higher again a couple of months ago it has been without Costco and lo and behold pundits, investors and traders alike have been nervous about the move higher. But with about the same lag in Costco to follow the S&P 500 as before, Costco is showing signs of life. The close in detail below gives the story. Since December the price action has built a rounded bottom and is moving back higher, approaching the highs of the consolidation between 118.50 and 119. A move over 119 would confirm a reversal back higher, and for me, a healthier bull market environment. I started a bit early today at 117.55.

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