Blog : Penny Stock Week: Time for Profit Taking?

by Ed Zwirn on August 12th, 2013

When does the price of that boat start to look like a better bargain than your penny stock? Is your small-cap stock starting to look more like a medium cap? Look for clarification on this score, as investors await a crowded calendar of economic updates over the next several days.

The stock market opened treading water Monday morning, following a week which saw the Dow Jones Industrial Average closing Friday at 15,425.51, down nearly 1.5% from the prior week's 15,658.36, breaking its six-week winning streak, its longest weekly winning streak since last August.

Broader market indices didn't perform quite as badly as the 30 DJIA blue chip stocks, with the NASDAQ losing 0.8% and the penny stock-rich Russell 2000 down about 1.1%.

And following a week devoid of much market-moving economic releases, penny stock investors have a slew of news updates which will show both the progress (or lack thereof) of the U.S. economy and the outlook for inflation, and with it the possible direction of Federal Reserve action, going forward:

--On Tuesday, the consensus calls for the report on retail sales to show a 0.2% increase for July, following June's 0.4% rise.

--On Wednesday, look for the July producer price index to show a 0.3% increase, down from June's 0.8% rise. The "core" figure, which excludes food and energy, is expected to show a steady rate of increase at 0.2%, the same as June's.

--Thursday's consumer price index release is expected to show a 0.2% July increase, down from June's 0.5% rise. The core figure is expected to show a 0.2% rise, the same as June.

--Also on Thursday, the consensus calls for a 0.4% July industrial production rise, following June's 0.3%.

--On Friday, two real estate numbers are expected to show pickups for July. Housing starts, which came to 836,000 in June, are expected to weigh in at 895,000 for July. Building permits are similarly expected to increase to 934,000, from 911,000.

In the meantime, some analysts are predicting that with the evaporation of the recent stock market winning streak, investors in everything from penny stocks to blue chips may be about to engage in some well-earned profit taking, as share prices reach attractive levels. Whether this means the market has truly peaked, and we are in for an unpleasant surprise, remains to be seen.