Why Were October Retail Numbers a Surprise?

Retail numbers didn’t fail to disappoint the market on Friday, to the downside that is. I must say that I really thought these numbers were already discounted in this market. Everybody knew that people suddenly became cheap and reined in their spending, given all the uncertainty out there and the massive losses people are taking on their 401k’s and house value. Suddenly everybody isn’t as rich as they seemed a few quarters ago and there just wasn’t going to be anything good in this economic report.

However the move down on Friday did feel orderly, so at no time did I feel threatened with the longs I put on the day prior. When the market rallied I even felt like I did the right thing buying when the market had no good reason to stage a huge rally on Thursday. But just as I should have covered my shorts when the market tanked on Thursday, I should have used Friday's rally to exit my longs, failing to execute on both counts. The frenzied selling in the last hour should not have happened, but I can’t blame people for taking what profits the market gave them. I’m beginning to think I made a mistake in holding so many long positions over the weekend when the media is hyping the G-20 so much this week. They had better come up with some groundbreaking results or I’m afraid the market is going to sell on the news given that it never even rallied on the rumor.

When I think about the market I picture a crowd on a boat that keeps running to one side of the boat and just as it was about to tip, it quickly runs to the other side to prevent the boat from tipping over. I really thought Thursday's rally was meaningful and it still may turn out to be, but Friday's weakness has me second guessing myself. Maybe we’ll have some more balance this week and everyone will realize the world isn’t ending and we’ll have a meaningful follow-through. This buying pressure has to happen quickly or this market is in big trouble as we’ve seen what it’s capable of with these wild sell-offs moving the markets 400-500 points in less than an hour.

From Financial Sense:

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