The market put on its rose colored glasses today focusing on a 0.5% increase in retail sales for July that helped overshadow a dreary reading on consumer sentiment. Specifically, the consumer sentiment index from Reuters/University of Michigan slumped to 54.9 in mid-August, the lowest level since 1980 and down sharply from 63.7 in late July. Following a four day session that saw the Dow swing 400 points up or down for the first time ever, today’s trading was much less volatile.
Although the markets did advance today they were well off their highs for the session and still finished down more than 1.5% for the week. While we’re going to stop short of calling this a moral victory for the markets, the nice thing now is that we have clear levels to watch moving forward in the weeks ahead. This weeks slump down, and consequential bounce, off of 1,100 on the S&P500 provides that level we’ll be watching. Should the market revisit lows, that will be the clear level to watch as any breakdown beneath it would have SPX in bear market territory and likely lead to further downside.
What was encouraging to us today was the market leadership displayed by the consumer discretionary sector. Stocks like LULU, UA, COH, JWN, & ANF all out performed. Traders should watch to see if these stocks can maintain above their recent lows as a sign that the consumer discretionary sector could be ready to regain its leadership role in the market. The flip side of that positive is the financial sector, which has continued to be a greatly underperform. XLF can’t seem to maintain any move above $13 this past week and until it is able to do so we should see it continue to limit any market advances.
Two penny stocks caught our eye today and performed well, PCFG & PUNK. PCFG should continue to uptrend assuming it can establish support above $0.07. With the stock trading to a new 52 week high all eyes will be on psychological resistance at a dime next week. In regards to PUNK, we suspect it is going to get promoted pretty heavily over the weekend judging by the price action and volume we saw today, we’re looking for a move towards $0.75 and then $1, with support at $0.50.
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