Market Trends

Retail sales fell 0.4% in September, well below analysts' expectations of a 0.2% increase.

The drop in oil prices caused sales at the pump to decline by 9.3%, the highest on record. Not accounting for the drop in gasoline, retail sales were up 0.6%.

On this news, the Retail Service HOLDRs (RTH:AMEX) is down slightly from yesterday, albeit still in a rising trend. The RTH has breached $100 in value again after its correction in the spring and summer of 2006.

What else is on the upturn? Well, the Russell-2000 small-cap index (RUT) continues to rise in a very predictable cycle, currently at a value of 757. The most recent high was 784, so I'd look for that price to be hit in the next three to six weeks of trading.

Material Profits

With oil prices up slightly today, I think it's a perfect time to tell you all about the National Alternative Fuel Vehicle Day Odyssey I attended yesterday.

Stay tuned for more info tonight.

Trading Tactics

Nothing says market correction like combining the words “inflation” and “risk” - especially when those two come out of the mouth of a key economic decision maker.

But that's exactly what happened when Michael Moskow, the president of the Chicago Federal Reserve Bank, said on Thursday, "The risk of inflation remaining too high is greater than the risk of growth being too low."

Although this may seem like good news in the long run, it means that additional rate hikes may be necessary. It seems like just last week we were reading rumors of rate cuts. Funny how quickly the viewpoint changes, right? Moskow is basing his comments on his “comfort zone” for core personal consumption, which falls in the range of 1%-2%. For the last 29 months, PCE has been above 2%, thus the reason for more rate hikes.

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