For the second quarter in a row, Cincinnati-based retailer Macy’s Inc. (NYSE:M) posted strong quarterly results. And for the second quarter in a row, M stock plunged on the news.

There are two factors at work here, and both mean you should avoid Macy’s stock — even heading into the holiday shopping season.

First, the markets are nervous. Most of us can already see that there’s a bear market on the horizon. Because of this, we get situations like Macy’s.

For instance, a stock will rally in anticipation of a strong quarterly earnings report or other major announcement. Then the shares will plunge on the news as investors take profits to lock in gains before the next market drawdown.

It’s happening all across Wall Street, and M stock is just one of the latest victims of increasingly protectionist investors.

Second, Macy’s earnings are hollow and unsustainable. For the quarter, Macy’s posted blowout third-quarter earnings of 27 cents per share, more than doubling the consensus estimate for 12 cents per share. Revenue came in at $5.4 billion, matching Wall Street’s expectations.

However, $42 million of Macy’s bottom line was made up of real estate sales. These sales contributed 10 cents per share to Macy’s results. Clearly, this is unsustainable.

What’s more, during the investor conference call, CEO Jeff Gennette used words like “downsizing” and “reducing” and said the company was shifting toward its magnet stores and away from flagship mall locations. Gennette said the company’s strategy was to now “right-size” its stores.

Hollow earnings, indeed. Gannette used practically every code word for a company that sees a significant slowdown in sales and pressures on its bottom line.  And yet, Macy’s still lifted guidance to a range of $4.10 to $4.30 from its prior range of $3.95 to $4.15.

Investors aren’t buying it.

Speculative options traders loaded up on put contracts (or bets that M stock would go down) yesterday. Options volume on Macy’s soared to more than 118,000 contracts, or more than three times the stock’s daily average. Puts made up 63 percent of the activity, indicating that quite a few traders believe this is just the beginning of Macy’s stock slide.

They have good reason to worry. In the wake of this week’s earnings, M stock is down nearly 16 percent, plunging from Monday’s high near $38.50 to yesterday’s close at $33.22. The shares blew through support at their 50-day moving average and are now testing key support at their 200-day moving average.

Macy's

The 200-day trend line is the last bastion of support for M stock. A breakdown would send the shares into bear-market territory.

What’s more, Macy’s is already showing signs that its former rally is over. The stock has entered a pattern of lower highs and lower lows that is indicative of a budding down trend. A continuation of this pattern could draw the stock’s 50-day and 200-day moving averages into a “death cross,” which would feed the selling frenzy and push M stock even lower.

Keep scrolling down to read more investment insights from Money & Markets contributor Thomas Lancaster.