We are seeing some negative options trading flow in retailers like Saks (SKS), Target (TGT), Lululemon Athletica (LULU) and Ann Inc. (ANN). Retail sales rose less than expected in June, up 0.4% rather than the 0.8% expected. Retail sales account for 30% of consumer spending.
One way experienced traders judge the health of the stock market is from the health of consumer discretionary stocks. Total consumer spending equals 70% of GDP. If you look at a chart of the Select Sector SPDR Trust Consumer Discretionary ETF (XLY), the stock market looks to be very healthy. On a short-term basis, it does look overbought at the high end of its range. Weather, gas prices and other commonly encountered summer slowdown issues are likely to have this group pull off its highs near-term before it continues its long-term healthy bullish trend.