Weak Retail Sales?

The Dow closed down 137 points on "weak retail sales" today. Retail sales came in worse than consensus today, spurring an early pre-market sell-off which lasted throughout the day. The bulls tried to take back lost ground in the morning (which is a good thing) but succumbed by the end of the day.

Now, the real issue is; are retail sales really "WEAK"??

Yes, retail sales were down 1.1% despite a consensus of +0.3% but what investors overlooked today was the fact that retail sales is an extremely volatile number. Even in the good economic conditions of 2005 to 2007, frequent drops to an average of -1% was commonplace. On top of that, -1.1% is far better than the dips of more than -3% of last year, this actually tells me that things are getting better, not worse.

As I have mentioned, this is going to be a volatile week with earnings, options expiration and a couple of big numbers coming up (see stock market calendar). In fact, the Empire State Index is up next tomorrow. So far, there is still no strong indication of the pullback that I mentioned on Sunday. We shall continue to monitor.