Next Week

As we roll into next week, earnings season slows down we will hear from the retailers. Not to sound overly pessimistic but I don't see any way that it will be good news. Any mention of the words "weak consumer" or "slowdown" coupled with mentions of excess inventories and the need to markdown additional merchandise could put the indexes right back to where we started a week ago. There are a couple of ways to play this potential weakness. First, you can target your least favorite retailers and short them. Secondly, you can take a more general play and short the retail ETF - RTH - as something of a hedge against potential weakness. I'm am not necessarily recommending this as a trade, I just think it is important to monitor this as it develops. Its also important to be very sure you have done your homework on any retail stocks you own, lest you end up like me and VLCM from last week. Stocks sell off much more furiously now than they would during a outright bull market so risk management is particularly important.

CMG - Chipotle Mexican Grill - They report earnings Monday afternoon and I think they will be good. I am halfway tempted to take a position in this stock prior to earnings; however, I am not going to. I need to be more disciplined with my trading so I am going to wait. In order for me to buy this stock I would prefer for it to break its current downtrend, and firm up a bit. It is a relatively "expensive" stock, I am not a real big fan of getting into a stock right before earnings when it is priced so richly. Also, the restaurant sector is under intense selling pressure. I can't think of a single restaurant stock with the exception of McDonalds that has gone up in the last month. Barring complete disaster with its earnings report (which I believe is highly unlikely) I am going to look for an entry point in CMG in the coming weeks.

And my last note: I hope you all enjoy the yahoo quote board on the right. I just discovered that earlier today and decided it would be a good addition to the site. Send any feedback to randommarketthoughts@gmail.com.