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Ulta, Lululemon Look Vulnerable

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One question on Wall Street's mind these days is the strength of the consumer and what effect it will have on the retail sector in 2013. The SPDR S&P Retail ETF (NYSE: XRT) had a solid 2012, up 19 percent, compared to a 13 percent gain for the S&P 500, but questions are out there about whether the fund will be able to outperform again in 2013.

After a strong start to the holiday shopping season, the year ended with a whimper. MasterCard Advisors Spending Pulse recently said that holiday-related sales rose 0.7 percent from October 28 through December 24, below expectations of three to four percent growth. And Tuesday, data from a Channel Advisors showed a slowdown in spending at Amazon.com's (Nasdaq: AMZN) and eBay's (Nasdaq: EBAY) online marketplaces.

Sales at Amazon.com rose 29.8 percent in December, down from November's rate of 43.7 percent. Meanwhile, sales at eBay.com rose 22.2 percent in December, down from 27.4 percent growth in November.

Let's just say that sentiment isn't all that positive in the retail sector at the moment. Many high flyers with seemingly strong fundamentals are facing selling pressure as investors question growth prospects ahead.

After a massive price since March 2009, Ulta Beauty's (Nasdaq: ULTA) technical picture is starting to weaken. Late last week, the company said total sales in the seven-week holiday period from just before Thanksgiving to the end of the year rose 23 percent from a year ago to $475.6 million. Solid growth, definitely, but same-store sales rose 7.4 percent, down from 12.6 percent in the holiday season of 2011.

Shares of yoga apparel retailer Lululemon Athletica (Nasdaq: LULU) have also been under distribution in recent weeks. The stock is down 6.4 percent over the past five trading sessions.

Earnings season hasn't ramped up in earnest yet, but after the close today, it will be interesting to hear what PriceSmart (Nasdaq: PSMT) has to say. It's basically known as the Costco of Latin America and the Caribbean. On the surface, fundamentals are solid, but PriceSmart has been facing institutional selling pressure for several weeks now.

A look at its weekly chart below show four higher-volume weekly declines since early November and another taking shape this week. This is what distribution, or professional selling, in a stock looks like.

The Thomson Reuters consensus estimate calls for profit of $0.62 a share, up 32 percent from a year ago. Sales are seen rising 12 percent to $535.4 million.

Just because sellers have been in PriceSmart ahead of earnings, doesn't mean it's bound to head lower. Still, buying demand appears to be drying up. Short interest is pretty high in PriceSmart so a short squeeze is possible if numbers come in better than expected. As of December 14, short interest was 1.9 million shares. It's leveled off in recent months, but keep in mind that PriceSmart only trades about 150,000 shares a day.

The bottom line is that PriceSmart looks vulnerable ahead of earnings, especially after a 1,500 percent+ price move since the start of the bull in March 2009. It's a classic late-stage base, meaning a good argument can be made that the big money's already been made. Smart money isn't right all the time, but I suspect it could be in this case.

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