Weaker than expected retail sales

Today’s Notes:¬†

Market attempted to overcome the weaker than expected retail sales data on Tuesday. The March number was revised higher, but the April growth of just 0.1% didn’t help the upside. The negative sales numbers helped treasury bonds rally as yields moved lower. As I stated yesterday, Yellen still wants lower rates… and amazingly the data continues to keep rates in check. Too much of a pass is being given by the market on the data as the “Winter” continues to be a good enough excuse. As we say all too often, let the market tell the story and follow where the story leads. For now, investors seem to be content with the data and will to put money to work in the markets overall. Thus, we continue to look for the positive trades as they set up.

The general consensus among investors remains a correction is coming this year. However, they are not selling stocks. In fact, the recent downturn the growth sectors has actually seen money rotate to stocks of a different flavor in the terms of less risk? In a statistical measurement of time the “less risk” status would hold up, but in terms losing money on the positions, downside risk is still a high probability in a correction. The issue is how much downside they would experience versus growth stocks. I am not sure that losing less money makes me any more content with the topic of losing money. Then why not sell positions? For the simple reason the fear of losing out on the upside should markets continue higher outweighs the fear of losing money on the downside. Why? Because we won’t lose as much! Oh what a beautiful reasoning process we have.

Markets are moving higher, but there is still fear and anxiety relative to how much downside risk there is overall. The simple truth is no one knows. Thus, you move forward at the rate of risk you are willing to accept and don’t worry. Disciplined decision making is what will make money in portfolios and avoid excessive losses.

Chart to Note:

The Japan Index gapped higher on Tuesday and is in position to attempt to break the downtrend line that has been in play since the November high. As you can see on the chart of EWJ, iShares Japan ETF the base is being built and the last four weeks has resulted in a modest upside move of 3.5%. Need to confirm a move above the $11.30 ish level and then $11.45, etc. This is one ETF that is worth watching for some potential upside opportunity moving forward.


Notes to Note:

  • Volatility index (VIX) fell below support at the 12.93 mark to test the previous lows a the¬†11.75 level. No volatility and sentiment is leaning on the positive side with a new high on the S&P 500 index. The NASDAQ volatility fell below support as the upside in the index helped the broad gains overall.
  • Financials moved just above the $22.08 resistance in place the last four weeks. This is a sector under stress when it comes to regulators and lawsuits. The words sustainable growth would have to define the outlook in order for any upside move to be any more than a trade.
  • XHB – the downgrade ¬†and short call on the sector took a hit as XHB has climbed to a key level of resistance. The ETF has bounced back to the $31.85 resistance and testing.¬†Could the sector reclaim the upside or are the sellers still in control? The trend short term remains on the downside… be patient.
  • KOLD –¬†continued higher as the downside of natural gas continues for the commodity.
  • Crude oil (UCO) is attempting to resume the upside trend with a solid move on Tuesday higher.
  • Sugar (SGG) made a move back to $57 and may set up and upside move short term.
  • Korea (EWY) attempting to resume the upside move in the country ETF.
  • Russia (RBL) breaking to the upside and the fear and political issues quiet down.
  • Peru (EPU) in position to break from the ten month consolidation trading range at the lows. Watch for upside clairty.
  • FCX – gained 1.9% to follow through on the break higher. The price of copper jumped on Monday and the stock may be reacting to that move, but I still like the upside as we have a trade in the position.

The markets remain somewhat uncertain in direction¬†even as the S&P 500 and Dow hit new highs. The growth sector experienced a solid boost Monday, but remain in their micro downtrend status. Tuesday was quiet with another lower volume trading day, but managed to hold on to the bulk of Monday’s gains.¬†Until the picture clears and defines the trend we will continue to take it one day at ¬†a time. Stay focused and remember that cash is a sector and sometimes the best trade relative to risk.