Good Tuesday afternoon everyone. Well, we can't say we're terribly surprised the rally effort pretty much petered out after most of the indices touched record highs today. As we've said before, sometimes traders collectively (and subconsciously) just need to see certain ceiling hit in order to start a selloff. Yeah, it's counterintuitive - a move into new-high territory is supposed to be bullish for stocks. I'm tellin' ya though, the market lives and loves to do unconventional, unexpected things. This is an ideal time for the bears to push back simply because it doesn't feel like they should be doing so. We'll look at it in detail below. The first thing we want to knock out of the way today is sharing some - and responding to - a couple of reader e-mails. Both were in reference to yesterday's edition of the newsletter. Neal wrote: ' "... consumer spending has been on the rise for nearly two decades now." How much of that rise is due to price 'inflation'? That is, are consumers buying more products? Or are they just spending more money? ' Thanks for the question Neal. It's one worth exploring as inflation can and does make a difference in this regard. We honestly can't quantify how much of the increase in consumer spending stems from economic growth and how much is a result of rising prices. Broadly speaking though, the bulk of it is because consumers are increasingly more capable of spending; they have more money in their pocket. We're drawing this conclusion knowing inflation has been quite tame for some time now. As our chart below indicates, the annualized inflation rate has spent the better part of the past seven years at or below 2.0%. The only exception to that was 2011's short-lived spike, but even that spike was ultimately caused by a relatively low comparison inflation rate. As you look further back in time, you'll see the normal inflation rate during periods of economic expansion are well above 2.0%. We also know that year-over-year consumer spending for most categories has been steadily above 3.0%. Do notice, of course, that the annualized inflation rate certainly looks like it's finally in a position to move above and stay above the 2.0% threshold. It'll be interesting to see if, or how much, that takes a toll on consumer spending. OK, movin' on. Trevor also wrote in yesterday: 'I know you said you don't do this often and it's not always welcome, personally I really liked this edition of your news letter. I read this newsletter every day and always like your perspective. I particularly like the market and sector analysis - the drilling down into details and giving the full picture. Anyway, thanks for the effort you put into it.' Thanks Trevor. Today's edition is going to be one you'll especially like, because we're going to dive deep into the consumer goods sector, taking a detailed look at its performance so far this earnings season and what the group's stocks look like as a whole. Just to set the stage, the consumer goods sector [and I'm using the S&P 500 Consumer Goods Index as my proxy] caught my eye this week because it's quietly emerging as a market leader. It's interesting simply because this group had been a laggard over the course of the prior 12 months. It always seems like the laggards are the most likely to rally well when something about the market changes. Anyway, take a look. After a sub-par 2016, consumer goods - along with utilities and healthcare - seem to be perking up a bit while most everything else begins to hit a headwind. Of the three new winners, the consumer goods sector seems to be doing the best, and has the best odds of building on the upside it's already mustered. I'm drawing that conclusion based on the shape of the iShares US Consumer Goods (IYK) chart. It's one of the few sector-based ETFs that isn't overextended. Its current rally looks fresh and sustainable. Perhaps more important, S&P 500 Consumer Staples Index is supported by compelling fundamentals. As you can see on the chart below of its earnings trend, projection, and valuation, there's room to grow. Better still, we're already seeing sales and earnings growth here. Last quarter's (Q3) year-over-year earnings growth was 9%, and for the fourth quarter that growth rate is expected to rise to 10%. That's better than the marketwide average for Q4 when taking out the accounting oddities like the ones energy stocks have been dishing out for a while. The revenue trend is attractive too. [The pink arrows mark the Q4 data.] This is an interesting situation, really. Earnings mostly stagnated between 2013 and 2015. The earnings revival may not feel like it's on firm-footing yet, but if you look closely at the chart you can see and sense profits as well as revenue have already started to inflate again. This suggests the bullish forward-looking earnings and revenue growth outlook aren't just wishful thinking. We know it's not the most exciting sector in the world, but you might be surprised what some of these boring names are capable of doing in the right situation. We'll be looking at the consumer goods sector closely in the near future for our premium newsletters. Finally, we'll close out with a quick look at today's market, using the S&P 500 as our barometer. Long story made short, the bulls tried to get something going on Tuesday, but couldn't. By the time the closing bell rang all the juice had been squeezed out, but it still wasn't enough to get the S&P 500 over a big hurdle at 2301. Maybe the rally just needed to get perfectly set today before a breakout move later this week, kind of like a runner needs to get set in the starting blocks. That's likely just wishful thinking though, for those that are thinking it. The reality is, although it hasn't been a problem yet, the VIX is not only sickeningly low, it's remained sickeningly low for a little too long now. We've just got a bad feeling about this...not that the market can't defy the odds. As we mentioned above, the market lives and loves to defy the odds, and vex most traders most of the time. That's the long way of saying should the S&P 500 managed to break above 2301, we can see building a rally on that. It's apt to be a short-lived rally, however. The VIX being this low for this long says traders have become dangerously complacent. The market won't let that go unpunished. Whatever the case, we can confirm for you right we will indeed have a new trading idea for you tomorrow (Wednesday) morning. 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