A Look at Wednesday’s Trading Activity: The overall market sold off yesterday following the announcement of the results from the Federal Reserve Board’s policy meeting. The announcement that the Fed would continue buying bonds in an attempt to manipulate interest rates was received very poorly by the market. (I’ve inserted a chart of yesterday’s Dow Jones Industrial Average at the end of this blog to show how well the market appreciated the Fed’s move.) The weakest sectors yesterday were the Biotech, Insurance, Banking, Oil Services, Broker/Dealer, Cyclicals’, Transports, Chemicals, Oil & Gas, Commodities, Airlines, High Tech, Gold/Silver, and Healthcare Providers. All the other indices were lower as well.
Oil was lower by $1.00 to $85.92 per barrel, and Gold was lower by $1.10 to $1,805.80 per ounce. Wheat was lower by $0.080 to $6.666 per bushel, Corn was lower by $0.044 to $6.856 per bushel, and Soybeans were lower by $0.174 to $13.20 per bushel.
A Few Thoughts Before the Open: In looking at the charts from yesterday’s trading activity, obviously everything was moving to the downside. As a point of concern, a fairly high number of the heaviest volume issues appeared to break downside support. This is obviously not a positive sign. Also, it should be noted that the S&P Insurance Index ‘IUX’ had the most bearish looking chart. I am not exactly sure why, but I will try to see what I can find out today and provide an update in tomorrow’s blog.
In looking at the charts, I think there is a good chance we could retest the market’s August lows within the next few days.
In looking at the various indices I track, I have the following comments.
Dow Jones Industrial Average: The Dow Jones Industrials closed at 11,124.84 I currently see upside resistance on the Dow at 11,613.53 and downside support at 10,719.94 on a closing basis. I think the Dow Jones Industrial Average could move lower and test 10,719.94 within the next several trading days. If support fails to hold at 10,719.94 then I see the next level of support coming in at 10.415.54 on a closing basis.
S&P 500 ‘SPX’: The S&P 500 closed at 1,166.76 I see upside resistance on the S&P 500 at 1,218.89 and downside support at 1,127.79 on a closing basis. I think the S&P 500 is going to move lower and test 1,127.79. If support fails to hold at that level, then I see the next level of support coming into play at 1,096.48
NASDAQ 100 Index ‘NDX’: The NASDAQ 100 closed at 2,258.30 I see upside resistance on the NDX at 2,325.06 and downside support at 2,192.96 I see the NASDAQ 100 moving lower and testing 2,192.96 on a closing basis. If support fails to hold at that level, then I see the next point of downside support beingat 1,975.33 on a closing basis.
The Dow Jones Transportation Average: The Dow Transports closed at 4,281.16 I see upside resistance on the Dow Transports at 4,683.96 and downside support level at 4,221.60 on a closing basis. I see the Dow Jones Transportation Average continuing to move lower and test 4,221.60 on a closing basis. If downside support fails at that level, then I expect the Dow Jones Transportation Average to continue to move lower and test 4,082.51 on a closing basis.
M.S. Commodities Related Equity Index ‘CRX’: The Morgan Stanley Commodities Related Index ‘CRX’ closed at 836.32. I see upside resistance on the ‘CRX’ at 847.10 and downside support at 824.91. If downside support on the Morgans Stanley Commodities Related Index ‘CRX’ fails at 824.91, then I see downside support coming in at 784.22 on a closing basis.
KBW Banking Index ‘BKW: The ‘BKW’ closed at 35.40. I see upside resistance on the ‘BKW’ at 41.42 and downside support at approximately 35.10 on a closing basis. If downside support fails at 35.10, then I expect the BKW to continue to move lower and test 23.34, the 2009 financial crisis closing low.
S&P Banking Index ‘BIX’: The ‘BIX’ closed 111.39. I see upside resistance on the ‘BIX’ at 120.71 and downside support at 100.96 on a closing basis.
Amex Broker/Dealer Index ‘XBD’: The ‘XBD’ closed at 82.31 I see upside resistance at 92.97 and downside support at 80.87 on a closing basis. I am expecting the ‘XBD” to continue to move lower and test 80.87 on a closing basis. If the Amex Broker/Dealer Index ‘XBD’ breaks through support at 80.87, then I expect the ‘XBD’ to continue to move lower and test 63.48on a closing basis.
S&P Insurance Index ‘IUX’: The ‘IUX’ closed at 149.64 I see upside resistance on the ‘IUX’ at 175.13 and downside support at 143.80 on a closing basis. I am currently expecting the ‘IUX’ to continue to move lower and test 143.80 on a closing basis. If the S&P Insurance Index ‘IUX’ closes below 143.80, then I expect the ‘IUX’ to continue to move lower and test 120.07 on a closing basis.
Amex Gold & Silver Index: The Amex Gold & Silver Index ‘XAU’ closed at 213.80 I see upside resistance on the ‘XAU’ at 228.95 and downside support at 208.47 I have been looking at increasing volatility this index and as a result have widened my trading range by adjusting the downside support level down to 208.47. As a result I basically see this index tracking sideways between 228.95 on the upper end and 208.47 on the lower end.
Amex Oil & Gas Index: The Amex Oil & Gas Index closed at 1,084.32 I currently see upside resistance on the ‘XOI’ at 1,169.65 on a closing basis and downside support at 1,050.78. The ‘XOI’ appears to be in a sideways trading pattern. I have widened our trading band to 1,151.76 on the high end and 1,050.78 on the lower end. If the Amex Oil & Gas Index ‘XOI’ closes below 1,051.76, then I expect it to continue to move lower and test 1,029.20 on a closing basis.
M.S. Cyclicals Index: The M.S. Cyclicals Index ‘CYC’ closed yesterday at 804.10 I currently see upside resistance on the ‘CYC’ at 868.97 and downside support at 789.46 on a closing basis. I am expecting the M.S. Cyclicals Index ‘CYC’ to continue to move lower and test 789.46 on a closing basis. If support fails to hold at those levels, then I expect the ‘CYC’ to continue to move lower and test 763.32 on a closing basis.
M.S. Consumer Index: The M.S. Consumer Index ‘CMR’ closed at 698.19 I currently see upside resistance on the ‘CMR’ at 725.78. and downside support at 691.44 on a closing basis.