Stocks have been in an out of the red ink today, but even though they're back in the black right now, the day isn't over yet. And, even those small gains were a struggle.  At the heart of the challenge for the bulls was a lower-than-expected University of Michigan Sentiment Index. The reaction to the data raises two very important (and related) questions:  Was the weak sentiment reading the cause, or just an excuse? (Stocks were and are ripe for a dip, with or without the help of bad news.) Regardless of the underlying reason, how long will any pullback really last? (News-induced moves are usually short-lived.) We'll address both questions below. After that, we hit the highlights from our community member's picks and thoughts. In the spotlight this week are Pepsico (PEP), gold, Spherix (SPEX), Internet Capital Group (ICGE), and more.    Pullback Looms, But Keep It In Perspective Stocks are at the inflection point. Normally that would be good (it sure beats not even making it to the inflection point), but to hang out right at the make/break line for five straight days? It's an alarming lack of progress. See, the longer it takes the market to clear a major milestone, the less likely it is to happen as doubt swells. The milestone in question - for the S&P 500 anyway - is the ceiling at 1129, where the SPX peaked in June, in August.... and today.  No, the day isn't over yet, and a lot can happen in four hours. I just don't think it will; investors are hardly motivated now that the rally cooled off so abruptly. In the interest of completeness though, sure, a close above 1130 (on a Friday no less) would likely renew the uptrend. As I said though, I don't see it happening.  Don't hear me wrong. In the grand scheme of things I'm still net bullish. That's a long-term view though. In the short run, it's just time for a retreat now that a known resistance level has once again come into focus.  As for how those two opposing ideas will work together....  The likely pullback shouldn't cut any deeper than the June or August dips did. Those two selloffs reached 1015 and 1040 (blue), respectively, and it was the second time 1040 had been used as a floor. This time around, I'm expecting 1040 to be an extreme case, with a more likely landing and reversal point being around 1090 (orange) - an expectation with two overlapping roots. That's where several of the index's key moving averages will converge within a few days.... probably about the same time the S&P 500 could actually lose those 35 points. And, 1090 is also the lower side of the gap level from September 3rd; we may just need to go back and fill it in for the bears to be satisfied.  As always, we'll reassess the long-term outlook once we get there, since the situations can change between now and then. For now though, this seems to be the shape of things.    Consumer Sentiment Reality Check If you're reading this, you're undoubtedly aware that stocks are in the red today because consumer sentiment - the University of Michigan Sentiment Index to be specific - plunged in August to its lowest levels since August of last year. The score of 66.6 was not only shy of last month's reading of 68.9, but also short of the consensus estimate of 70.0.  On the surface, the numbers seem dire. Too bad the numbers don't actually mean anything. I have two issues (three, actually - another story though) with living and dying by opinion-based 'economic' data.  The first one is, while these sentiment measures are supposed to be barometers of how consumers are supposed to behave over the next twelve months, in reality, the index indicates consumers' opinions of headlines and the stock market over the prior month. It's a psychological force called the 'recency effect'. How was the market doing in August? Pretty lousy. Hmmmm. I have a nagging feeling that next month's sentiment survey will be surprisingly strong, now that the market's rebounded.  Moreover, when you dig deeper into the survey's numbers you'll find the bulk of the reason for the plunge stemmed from higher-income households that simply aren't big fans of their tax breaks being wiped away. They may be saying they're pessimists, but it's likely to just be a complaint about taxes.  My second issue is, there's actually very little (if any) statistical correlation between the stock market and the University of Michigan Sentiment Index. While the Conference Board's Consumer Confidence figure has a modest correlation with the market's overall performance, the volatility of the Michigan Sentiment Index makes it practically impossible for investors to actually draw conclusions from.  No, the media would never say that. That's because most of the media are lemmings. Take a look the chart though - you can see it's a bit of a mess.  Better still, take a look at its long-term history and look for any correlation with the broad market. You'll find little, except in the very, very long-term.  But what about the fact that the Michigan Sentiment Index reached a multi-year low this month? So it did. It also hit a multi-year high in January of 2000, and a multi-year low in February of 2009... right before major turning points for the market that were diametrical opposites to what was suggested by sentiment at the time.  If anything, the extreme opinions suggested by the sentiment index are contrarian indicators, meaning you should be bearish when everyone else is decidedly bullish, and vice versa. Even that's a shaky use of the data though. Mostly, the poll is just a 'vote' on how well things went in the prior month.  And my third beef with the way this information is presented? One month's data is irrelevant. The trend - which takes at least three months to become evident - is what we need to be interested in. That's another discussion though.  Bottom line? Don't sweat today's University if Michigan Sentiment number. The market may well unravel from here, but it's nothing the index has actually predicted.  Sorry to get on the soapbox there, but it had to be done.  Helping you get more out of the market, James Brumley Editor - Small Cap Network    From the Community - New Commentary -  Ready for a Prime Time Audience: FEED, ICGE, AVNW In several regards, the Internet Capital Group, Inc. (NASDAQ:ICGE) is a mutual fund of internet-based businesses; it owns anywhere from a third to all of thirteen different web-based properties. Given management's expertise, the value to shareholders is simple.... they know how to distinguish between good and bad internet enterprises. Check it out.  Unleashed, or Close to It - Looks at RGN, SBGI, and GERN RegeneRx Biopharmaceuticals, Inc. (AMEX:RGN) had been the equivalent to a slingshot that was pulled back but never realized - the long range-trading pattern for RGN from June through the middle of this month meant the tension was there.... it was just idle. Until yesterday. It looks like the party's finally starting, as the long-time ceiling was smashed.  Gold, Silver, Oil & S&P 500 Are Popping & Dropping?  Chris Vermeulen takes a good thorough technical look at all the market's 'biggies'... gold, oil, and the major indices. The longer-term charts he shares are really something of an eye-opener too, in that several of them are in more potential trouble than most may realize. You just have to see it to appreciate it.  Your Best Bullish Bets Right Now - Looks at CXM, SPEX, and LQMT Following the nasty pullback on the 7th for Spherix Inc. (NASDAQ:SPEX), it's been nothing but indecision-palooza. Every move (literally) since then was reversed the next day, with many of those reversals qualifying as inside days or outside days. Well, it looks like the slugging is over. And the winner is..... the bulls. (Play it tight though.)  EGTK: Sitting On a Major Oil Deposit? Like high-payoff longshots? Think about Energtek Inc (PINK:EGTK). This reader-submitted idea as an admitted gamble, but a compelling one if any or all of the rumors are actually true (or even half true). We're going to solicit your help on this one - if you can confirm or deny any of the ideas posed here, please leave a message as a comment on the article.  - New Trades -  Hopefully Not Too Late To Jump In On Montpelier Re Holdings Ltd. (NYSE:MRH) - Jeff Owen is now a proud owner of this insurance/reinsurance company, stepping in right after a key moving average line was hurdled.  Haven't Heard About Pier 1 Imports Inc. (NYSE: PIR) For A While (short) - Joseph Chanine views the recent, and somewhat unjustified, rally from PIR as a shorting opportunity.  Pepsico, Inc. (NYSE: PEP) Cut Out The Middle Man - Don Henderson put his pretend money where his real mouth was, after sharing these positive thoughts about Pepsi's recent string of solid strategic decisions.  Gas seems to be on the rise... AGAIN, Long AmeriGas Partners LP (NYSE: APU)- Jason Okamoto is right about that, whether it's in the near-term or the long-term. The paradigm shift for both timeframes should boost APU, and the rest of the group too.    We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Email the Editor If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC  4653 Carmel Mtn Rd  Suite 308 #402  San Diego, CA 92130   Share the SCN Newsletter If you find the Small Cap Network Newsletter informative and profitable, please forward our newsletter alert service to like-minded friends and associates who share similar market interests.   Ensure Newsletter Delivery To ensure newsletter delivery, you can add any additional email addresses you may have to the Small Cap Network Member List. Receiving the Small Cap Network Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the Small Cap Network recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery.   Change Your Subscription Settings