Technical Outlook: Keep an Eye on Retail

Investors and market commentators continue to focus their attention on the momentum action of the commodity and oil stocks, but amid all the hoopla, other sectors have quietly built solid bases and unexpectedly broken out to the upside.

The news media often focus on analysts and money managers promoting the hottest areas of the market. However, once everyone's attention is on a certain sector or set of stocks, many times that means the majority of the gains have already been realized.

I am certainly not a bottom-fishing type of money manager, but I do look for areas that have been ignored for quite some time and that, with the help of catalyst, could be pushed higher in the intermediate-term time frame of several weeks to several months.

Certain areas of the market turn can turn higher when economic conditions appear to be at their worst. That happens because all of the negativity has already been priced in, and the market is looking several months into the future.

Over the past few days while I was screening the market for strong earnings increases, I ran across some interesting situations in the retail sector. This was especially intriguing since the recent consumer confidence numbers that were reported in May posted a 47% year-over-year decline -- the sixth-largest drop in the index's history and a multiyear low.

That certainly wouldn't motivate many people to look at the retail sector, nor would the fact that the summer months aren't necessarily historically strong times for retail sales. However, we have $160 billion of retail checks currently going out from the government's stimulus plan, and that may be just enough help to get the sector a boost over next couple of months.

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