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All Eyes on the Consumer


The preliminary retail sales data that is coming out is about as clear as mud.


Good Morning Minyans,

The futures are pointing to a higher open and beg to be sold this Monday morning. Traders yawned at Friday's move and while the follow through is interesting, I don't know a single person out there that is going to embrace it. Once we see what sort of fire power the bears have left, we can get a better idea if this recent bounce attempt has any legs and so I will be watching the early action closely to see what happens when early pressure is applied.

The preliminary retail sales data that is coming out is about as clear as mud. I have heard everything from an 8% increase (ShopperTrak) to a 3.5% increase (Bloomberg) and pundits are already discussing just how much of a role the sales and ridiculous shopping hours played. However you interpret the data, what matters is that all eyes are on the consumer and with a very depressing housing market as seen in the stocks such as Toll Brothers (TOL), Ryland Group (RYL) and Centex (CTX), it is hard to believe that the average family is remaining optimistic about the future and spending with ease. Of course $100 oil doesn't help nor does a $4.50 gallon of milk. With the consumer in focus the battle ground is currently within the retail sector. We saw a bounce on Friday which may continue however many charts are predicting bad things to come and a few of my favorites for shorting opportunities continue to be: Men's Warehouse (MW), Guess Incorporated (GES) and Coach (COH).

I don't know anyone who doesn't agree that we are overdue for an oversold bounce however when everyone seems to be looking for it, is precisely the time it won't happen. If it does, I suspect trapped longs will take the opportunity to reposition and shorts will reallocate capital to new ideas.

At this stage of the game the plan is simple; capital preservation and patience. If you feel comfortable shorting or exploring some of the inverse ETF's, now is a perfect time to start considering this and possibly averaging in. If you are eyeing bounce plays, I would be extremely cautious, moving slow and playing small.

The trend seems to be changing which means the path of least resistance may now be down. If this is the case, it will be time to change your strategy in order to participate. A new trend should be embraced and not shunned.
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