They want to know at what price Gap is selling the merchandise. Is it above what Gap paid for it? Is it well above? Or is it "promotional" and therefore lacking great margins? Is Gap selling product for just slightly above cost, making all of those top-line sales not fall to the bottom line?
It's the same thing in the stock market. Tape watchers, or those who make a living trying to spot at what point merchandise gets sold, are best able to judge the health of the market. Shrewd traders look for "prints," or sizable pieces that go on the tape that required merchandising of some sort.
Some of these pieces are secondaries, like the
trade last week, in which I participated. As long as Kohl's holds the "print" price of $73.50, where the deal occurred, the stock will be regarded as healthy. If it deteriorates below the print price, as it did at one point Monday, then it will be regarded as unhealthy or -- using retail terminology -- promotional. A close below the print could be perceived as very negative.
Other times, these prints are just important pieces of merchandise that occur during the day. At important inflection points in the market, prints fail, a really bad sign, or prints hold and work, a great sign. For instance, last week, there were a series of prints in
that failed to hold. That is, there were trades that went on, large six figure trades, where sellers sold at discounts to previous sales. These should have held if the stock were strong and they didn't. As I mentioned last week, these were tells for me to go, and I did not listen to them.
Now the stock is all the way at $78 and I violated my trading discipline by not kicking out T the moment I saw the prints "violated," meaning that the stock immediately went under the print price. That is a sign that the stock is in bad hands. Had these prints held and the stock rallied, I would have known that T had some real power to it.
I saw the same thing in
, another poorly acting stock. I love CVS, but I don't want to buy any until I see some stability and some prints hold. There were many times that so-called "clean-up prints" occurred: big pieces of merchandise meant to complete a seller who had been doing damage to the stock. But each clean-up print was soon violated and the stock has since dropped a quick 5%.
When stocks violate the low of a print, that is a sign that sellers are overwhelming buyers and you don't want to be there short term. Longer term, all of this could be gibberish. That said, I hate being underwater on a stock, just hate it, and I watch this stuff as closely as possible.
On Friday and Monday, many prints were violated throughout the market. They contributed to the negative tone of the market overall.
The only thing that cures this ailment is lower prices. Merchandise finally gets to a price where it holds and then moves and stocks rally. Are we at that level yet? We weren't Friday and we weren't Monday.
So, keep an eye on the prints. Look for big trades, mark them down where they occur, and then check back later in the day to see if the stocks are above or below these prints. If they are above, we have reached safe levels. If not, we have to go lower before we bottom.
I will pounce on T only after I see some prints hold. I bought more Kohl's when I saw the print hold at the end of Monday's session. I still can't get the courage up to buy CVS. Not yet, but soon. (I will rewrite this piece for newer traders this weekend.)
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long AT&T and Kohl's, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at