Market Commentary – July 12th, 2011

A Couple of Thoughts After the Close:

  1. Following a roller coaster of a day,  the Dow Jones Industrial Average finished the day just over 58 points lower to close at 12,446.88  It looks to me like the Dow is going to continue to move lower.  While there might be some support at its 40 day moving average, which is now at 12,331.29;  I think the Dow will most likely continue to move lower and test support at 11,934.58
  2. It looks like the Dow Jones Transportation Index has started a new downward trend.  The Dow Transports closed at 5,386.16  I think there is a good chance it will continue to move lower and test support at 5,060.59 on a closing basis.
  3. The Amex Airline Index ‘XAL’ closed at 41.58 and appears to be heading back lower.  I expect it continue to move lower and test its June closing low of 40.34
  4. The Philadelphia Semiconductor Index ‘SOX’ gapped lower on the open of trading today.  It finished the day at 394.96  It has broken its recent uptrend.  I expect it to continue to move lower and test 388.21 on a closing basis, and possibly 373.85

I really do not see any reason the market should be moving higher at this point in time.  I think the issues in Europe are not really improving, and they are actually getting worse.

Additionally,  I think the budget deficit situation here in the U.S. is a prime example of how the Democratic party has absolutely no concept of economics.  In his 1st election campaign,  Bill Clinton’s team had a slogan of “It’s the Economy, Stupid!”  Well,  the modern day Republican version should be “It is About Growing the Economy,  Stupid!”

I do not see any deficit deal being able to be worked out with the Democrats other than one that will hamstring the economic growth of this country;  basically one that would be suicidal for the Republicans to sign off on.  I think the Democrats feel they can force a default on August 2nd, blame it on the Republicans, and score big in the 2012 election.  Basically they are willing to play Russian Roulette with the economy of the United States in hopes of gaining an advantage in the next election.  Dick Durbin and the Democrats in Washington should be ashamed of themselves!  They are incompetent, short sighted, self serving fools who do not deserve to hold the offices they do

A Few Thoughts Ahead of the Open:

In looking at the charts from yesterday’s trading activity a few things stand out.

  1. The vast majority of the heavy volume stocks have negative chart patterns.
  2. All the various stock indices I look at appear to have started new downward trends.
  3. The Dow Jones Industrial Average closed approximately 3 points above its 9-day moving average.  If the Dow closes down today, then I think there is a strong possibility that we will see the Dow Jones Industrial Average continue to move lower and test its 40 day moving average which is currently at 12,325.36
  4. Looking for something to short today where I can write puts against the position.  Possible candidates include just about everything.

Market Commentary – July 11th, 2011

A Couple of Thoughts Ahead of the Open:

  1. I am looking for the Federal Debt Ceiling to dominate the news this week.  I am not real optimistic that a deal will be reached this week.  I think we are at the tipping point where the Federal Debt is going from manageable to out of control.  I think the Republicans’ and their votes get this; and I think the Democrats and their voters think that because it has been manageable in the past it will continue to remain manageable.  It is the equivalent of seeing a disaster coming and believing nothing is going to change.  It is one or the other,  and there is no common ground.
  2. I am looking for news regarding the European debt crisis spreading to Italy; and somewhere it goes from being too big to fail, to too much for Germany to swallow.
  3. I am also looking for increasing news regarding the talk of a double dip in the economy.
  4. The pre-market futures are obviously pointing towards a lower open, and baring some unexpected news that reverses that trend, I am expecting the market to open lower.
  5. In reviewing the charts from Friday’s trading activity,  the vast majority of the heavy volume stocks had negative chart patterns.  It has been this way for the last several trading days.  This generally signals a market reversal.
  6. Looking at entering a short position and selling puts, creating a covered put trade.  Possible short sale candidates include:  BAC, PFE, SCHW, MSI, A, NE, MMI, VMED, GIS, IMAX, MHK, USG

Market Commentary – July 7th, 2011

A couple of thoughts ahead of the open:

  1. I think the jobs numbers were mixed.  While ADP came in better than expected, historically the ADP number is subject to wide fluctuation and revisions.  Secondly, the jobless claims numbers continue to look negative and show no indication of economic growth.
  2. Despite the futures being positive again this morning, when I look at charts for the stocks with the heaviest trading volume I am not seeing very many that appear to be breaking above upside resistance.

I know the trend is to the upside,  but still somewhat skeptical until I see Friday’s unemployment numbers.

Market Commentary – July 6th, 2011

A couple of notes from my review of the charts from today’s trading activity.

  1. The Dow Jones Transportation Average hit a new yearly closing high today.  It looks like it has completed a “cup pattern” with a measured move to 5,969,15 on a closing basis.
  2. The S&P Chemicals Index ‘CEX’ hit a new yearly closing high today.  It also looks to have completed a “cup pattern” with a measured move to 364.16 on a closing basis.

The market obviously looks to be moving higher,  however it should be noted that trading volume continues to be light.  As a result I am remaining skeptical until I see how the market behaves following the release of jobs data Thursday and Friday of this week.

Oil closed at $96.65 per barrel, and Gold closed at $1,529.20 per ounce.

Market Commentary – July 5th, 2011

I would like to welcome everyone back from the 4th of July holiday weekend.  The overall stock market staged a rather impressive rally the last week of June.  The Dow Jones Industrial Average rallied from 11,934.58 to close out Friday July 1st at 12,582.77  This represents a gain of 648.19 points or approximately of 5.4%.  Hopefully this should be obvious to all that weekly gains of this magnitude are not normal and the track record for follow through is not all that great.

I track approximately 35 market indices on a daily basis.  In looking at the charts this morning from last week’s trading activity, they clearly indicate that not only are the major market indices very over extended but all the various sector indices (with the exception of the gold indices) are all also seriously over extended.  To me,  this indicates that we are poised to see a market pullback.  Also, I would like to point out that the Dow Jones rally at the end of May reversed course and headed back lower when the Dow reached 12,569.79 on a closing basis on May 31st.  Additionally I just don’t believe a vote of the Greek Parliament is going to solve their problems.

I think the market rally at the end of June was primarily a combination of end of the quarter “window dressing,” and short covering prior to the 4th of July holiday.  My thoughts are we are going to see a pullback, and possibly the start of a new downward trend,  in the market in the next few days.