Market Commentary – July 18th, 2011

A Few Thoughts Before the Open:

  1. The Dow Jones Industrial Average closed Friday at 12,479.73  Despite Friday’s move higher, the chart continues to show weakness.  I think it is possible we could see it test its 40 day moving average,  currently at 12,350.52 within the next few days.  Absent a concrete deal on the debt ceiling within the next few days,  I continue to think the Dow Jones Industrial Average will test 11,934.58
  2. Last Friday was options’ expiration.  It is not uncommon to see a brief, temporary trend reversal on options expiration day as traders unwind their positions.
  3. The S&P Banking Index ‘BIX, and the KBW Banking Index ‘BKX’ both look weak and on the verge of setting new yearly lows.
  4. The Dow Jones Transportation Index closed Friday at 5,342.54,  basically on its 40 day moving average.  I am seeing continued weakness and expect it to test 5,060.59
  5. The Morgan Stanley Healthcare Providers Index ‘RXP’, the S&P Healthcare Index ‘HCX’, and the Amex Pharmaceuticals Index ‘DRG’ all basically closed on their 40 day moving average.  I consider this to be a sign of weakness.
  6. All the various technology sector indices are showing weakness.

I am going to be looking for stocks showing weakness to short and write puts against.

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