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Why Today’s Big Retail Sales Beat Isn’t All It’s Cracked up to Be

by | Sep 16, 2021

Before we get into the August 2021 retail sales report released this week — which is a huge driver of markets — I wanted to touch base on the free trade we sent Wednesday.

Early Thursday, the Direxion Daily S&P 500 3X Shares (NYSEArca: SPXL) dipped below $118. If you followed my instructions, you would have finished off buying the stake we recommended a week ago.

Source: Yahoo! Finance

And if you followed all of the instructions from this past Thursday until now, you should now be averaged in at a little below $120 a share.

And now, we wait…

Options expiry is Friday, Sept. 17, and it should be the last round of market volatility we see — at least for a couple of weeks.

If we get the same pattern we’ve seen literally every month this year, we’re in line to pocket a 15% to 30% gain in just a couple of weeks… using just stocks. No options.

You’re welcome!

Now, let’s take a look at this week’s August 2021 retail sales report, which I listed as the No. 3 market driver.

On the surface, the report looked great and markets responded in kind. But when I looked under the hood…

Did the August 2021 Retail Sales Report Truly Outperform?

Both of this week’s prior market drivers — Consumer Price Index and Import/Export Prices — printed basically in line with expectations.

The market basically took those well, with lower volatility than we’ve seen the past two monthly options expiry weeks.

But when we dig in a little — as we noted on Tuesday’s CPI print — sometimes things aren’t exactly as they seem.

Thursday’s market driver release was no exception.

Expectations were mild to say the least, with a projected decline of 0.7% — presumably due to concerns around the delta variant.

But when 8:30 a.m. EDT rolled around, the financial media was pleasantly surprised to see the results of the August 2021 retail sales report…

Source: Bloomberg

Instead of a decline, we got a 0.7% increase. And whereas bulls and bears in the media were mixed following Tuesday’s CPI release, this reaction was uniformly positive.

CNBC gushed of outperformance in the face of adversity…


Source: CNBC

Bloomberg was more measured, but even it couldn’t find all that much to complain about…

Source: Bloomberg

But there was one thing that stuck out to me. I’ll try to point it out by highlighting the first table I posted above.

Source: Bloomberg, My Terrible Art Skills

Not my best highlighting job, obviously, but I’m trying to point out the revision to the prior month.

July data initially came in down 1.1% — a figure that ultimately gave rise to the negative August projection.

However, that July number was revised down to -1.8%… meaning this gain basically just got us back to where we thought we were a month ago.

While it undoubtedly indicates that the delta variant didn’t impact back-to-school shopping, it also means that our economy was worse off than we thought in the first place.

With manufacturing lead times still on the rise, consumer prices continuing to rise and more people still on unemployment than during the worst of the global financial crisis…

Source: Bloomberg

Let’s just say that retail sales around Christmas time this year could sorely disappoint.

With consumer spending accounting for about 70% of U.S. gross domestic product, that could portend this merry-go-round of all-time market highs beginning to grind to a halt around the time Santa is supposed to slide down our collective chimney.

On the bright side, though, if he leaves coal in your stocking… At least you can go sell it.

Source: Bloomberg, SGX Coal Futures

All the best,

Matt Warder
Fortune Research

WRITTEN BY<br>Matt Warder

Matt Warder

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