We have talked a lot about trade down plays on this show…. given that we are in the midst of the worst economic crisis since the Great Depression… and looking at the charts of Big Lots and Family Dollar, that trend is definitely real… look at the Big Lots first, okay… here is the weak link chart, according to Dan Fitzpatrick, my colleague at TheStreet.com, where I am chairman… he is a great technician, he is our go to guy when we look at the charts… these two lows… the one in December and the one that the stock is experiencing right now… are not that similar… not… both were the products of strong and persistent selling… but after the December low where the stock had fallen 58% below its 200 day moving average… a piece of technical jargon that tells us how closely a stock is hugging its long term trajectory… Big Lots snapped back… chartists call this kind of low… an event, a market crushing of the stock… the current low which is extended 46% below the 200 day average, is not an event… it is part of a bottoming process… because it didn’t take out this event… and it typically leads to more modest and predictable gains at least according to the technicians.

Now, let’s take a look at the daily chart… Big Lots daily chart is where the bullish picture really comes into focus… Big’s 50 day moving average, how the chart has been trending… has finally caught up to the stocks price decline… so now Big Lots is ready to leap frog over it… during February the rallies in Big Lots have extended above this moving average… which indicates that there is more aggressive buying on dips, and less aggressive selling into rallies… this is a bullish sign to a technician… which says that shareholders are more comfortable holding the stock and taking the stock… taking the stock, which is Wall Street jibberish for paying up for the stock that is offered, rather than waiting to be hit by sellers… that shows aggression… supply is drying up, we won’t have to wait long to see if Dan is right… Big Lots reports tomorrow morning… and he is looking for a big up move.

Now, let’s look at Family Dollar… which you have heard me talk about many times… what do the technicals say here… here is a weekly chart of Family Dollar with the S&P 500... starting in mid January of 2008, when we realized… um, wasn’t that around the inauguration of the President of the United States… Family Dollar’s performance has been inversely correlated with the S&P 500... Family Dollar has moved higher dramatically outperforming the market… maybe Family Dollar, maybe Obama is the, never mind… now lets go to the daily chart… each pullback is being bought at higher level than the last one… that indicates that the buyers of Family Dollar are increasingly getting eager to pull the trigger… the demand for the stock is what is known as being persistent… but at the same time supply is also pretty persistent… that is what the flattop line at $29 means… every time the buying pressure pushes Family Dollar up to that level… shareholders sell enough stock to bring it back down… according to Fitzpatrick, this kind of triangle pattern… made by the 50 day moving average and the flattop line should have broken out by now… so he is not that crazy on this… Family Dollar should have crossed that line and gone up… if you believe the technical hocus pocus the longer a stock trades sideways into the tip of a triangle… the more likely that it is simply to fall out the bottom… why… because the only reason that Family Dollar hasn’t broken out over $29 is because the supply is too plentiful… too many shareholders are willing to sell.

A technician would like Family Dollar more at $29.50... that is when he would like it… if it went up to this thing that is where he would like… rather than $26.47 where I would like it… because the $29.50 would confirm the uptrend… that is why I like to stick with fundamentals… when I like a stock… I want to buy it here lower… I want to get it cheaper… I want to get it after the breakout, that is not my game… you know that Fitzpatrick has stuck his neck out, he has absolutely stock his neck out because Big Lots reports tomorrow… and he thinks it will pop, when it reports, based on the technicals… bold move… I say step back… let the market decide… I think that Big Lots could rally… but it is also a place that you do not want to go to… my Big Lots, by the way, is so disorganized, so scattered, so downright trashy, that I just can’t believe that this is the right one to go to, the line that I went do was one of the longest I have ever seen, because there were two registers with slow as molasses cashiers, I am telling you the disorganization was palpable, I felt like I was in some sort of flea market, except without the rigor, or organization of a flea market, although I didn’t stick around long enough to see if it actually had fleas… it was the most inhospitable place that I had ever shopped at… next to the register was a cardboard box with a couple of Cheetos bags, one of them opened, I took a shower the moment I got home… I will admit though that Big Lots had the picture books I wanted at a decent price… but what a gauntlet to go thru though.

I don’t see how the business model of a close out merchandise can work with virtually all of retail has become close out… they are competing with everyone that is going out of business… and that is a lot of competition at the moment… same store sales have been decelerating… I think this story is over… Family Dollar is the one to buy… if we get a rally in Big Lots tomorrow, I want you to sell, sell, sell… if we were playing Monopoly, Big Lots would be Baltic… and Family Dollar would be Oriental… Oriental a few spaces to the left… isn’t that better… this bad neighborhood has become one of the best neighborhoods in the market… and based on the fundamentals, I think that FDO is the best of the cheap houses.

Now, Family Dollar has been turning itself around for the past year, improving its margins, upgrading its systems to accept more credit cards and food stamps… hey, something that actually benefits from Obama’s non-stimulus packages… the non-stimulus stimulus, that is what we call it here… it has been sourcing initiatives to lower costs, allowing margins to expand… something us fundamentalists believe leads to higher stock prices… stellar quarter January 7th… we brought Family Dollar CEO Howard Levine on, hey I like that guy, he was telling us about consistent same store sales growth and operational improvements creating earnings growth… I think this is the one to buy.

Here is the bottom line…