A Look at Tuesday’s Market: The overall market finished Tuesday relatively flat on low trading volume. In the commodities markets, Oil was higher by $0.70 to $93.43 per barrel, and Gold was lower by $10.20 to $10,600.40 In the grain markets where the drought is becoming more of an issue, Wheat was lower by $0.170 to $8.396 per bushel, while Corn was lower by $0.030 to $7.796 per bushel, and Soybeans were higher by $0.012 to $16.234 per bushel.
One of the things I noticed in my review of the charts from yesterday’s market was that the Dow Jones Transportation Average has not really participated in the market’s move higher this year. While the Dow Jones Industrial Average is higher by approximately 7.8% year to date; the Dow Jones Transportation Average is higher by only 62.09 points or approximately 1.24% year to date. For those who follow the Dow Theory and the relationship between the Dow Jones Industrial Average and the Dow Jones Transportation Average, the lack of movement in the Dow Transportation Average is a significant signal. For me, this usually signals that either the Dow Jones Transportation Average is going to move sharply higher and play a game of catch up; or there is a significant risk that the Dow Jones Industrial Average will move back lower and give up the majority of its year to date gains.
My thoughts are that given that Europe appears to be moving back into a recession and our own fiscal mess, we are more likely to see the Dow Jones Industrial Average move lower than we are to see the Dow Transportation Average move higher.
A Few Thoughts on Wednesday’s Market: I think the market looks to be at a level where it is encountering upside resistance. I think that there is a greater chance of the market moving lower from these levels than there is of it moving higher.
The Bottom Line: I remain cautious on the market at this point in time.