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The overall market moved sharply higher on Monday in a broad based move that saw every index I track move higher on the day with the exception of the Semiconductors. The strongest sectors were the Banking, Insurance, Oil & Gas, Natural Gas, Chemicals, Commodities, Airlines, Broker/Dealers, Cyclicals, Transports, and Retailers. Oil was higher by $0.39 to $80.24 per barrel, and Gold was lower by $45.00 to $1,592.70 per ounce. It should be noted that Gold is lower by just over $213 per ounce in the last 3 trading days. Wheat was higher by $0.074 to $6.482 per bushel, and Corn was higher by $0.094 to $6.48 per bushel, while Soybeans were $0.016 to $12.596 per bushel.

In looking at a chart of the Dow Jones Industrial Average, I think considering the size of Thursday’s selloff, Friday’s move higher was extremely weak. Normally you would expect some form of bounce following Thursday’s move lower, and in my opinion Friday’s move doesn’t count. As I write this morning’s blog, the pre-market futures are indicating an almost 120 point jump on the open. While it might be tempting to see this……………….

The Dow Jones Industrial Average closed at 10,733.83. I have downside support at 10,719.94 If the Dow closes below this level, at any point in the next few trading days, then I see the next level of support at 10,415.54. However with the current situation we could easily move through that support level in a couple of week’s worth of trading. If that is the case, then we are looking the support levels set shortly after the “Flash Crash,” where I see downside support on the Dow Jones Industrial Average coming in at 9,686.48 I think there is a very good chance we could see the Dow break through support at 10,415.54 within the next couple of weeks, and there is good chance ………..

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…………………

In Looking at the charts from yesterday’s trading activity I have the following thoughts.

1. Despite yesterday’s relatively flat close by the major market indices, several of the various sector indices looked to be turning back to negative territory. My thoughts are that this could be a sign of things to come over the course of the next few trading days.

2. In looking at the charts of the stocks with the heaviest trading volume, the vast majority that appeared to be breaking out from their sideways trading patterns, broke to……………………………

A Few Thoughts Before the Open: In looking at the charts from yesterday’s trading activity I do not see anything that really stands out as being significant. However there are two things worth noting. The 1st being that the NASDAQ 100 ‘NDX’ looks to be stronger than the other major market indices. In comparing the charts of the Nasdaq 100 to the Dow Jones Industrial Average there appears to be a divergence in their performance over the course of the last year. However other than the fact that the Nasdaq 100 declined significantly more following the dot.com bubble bursting and therefore has a greater amount to recover, I can’t find any significance to this.

A Few Thoughts Before the Open: In looking at the charts from Friday’s activity the extreme vast majority of the charts were to the upside. However very few had broken above upside resistance levels. The individual stocks within the overall market currently have an extremely correlation with the movement of the major market indices. I feel this a result of the increased use of exchange traded funds (ETFs) and computer driven trading; basically I think all the programers went to the same school and are following the same playbook. However this

The Dow Jones Industrial Average rose 186 points to close at 11,433.18 This took the Dow Jones Industrial Average to the upper end of its trading range. However despite the nearly 500 point move higher by the Dow it is still below its 40 day moving average and has not broken through upside resistance which I see being at 11,493.57 on a closing basis. Until the Dow Jones Industrial Average closes above 11,493.57 (which it could do today), I still consider the Dow to be in a sideways trading pattern with the upper end at 11,493.57 and the lower end at 10,719.94

A Look at Wednesday’s Activity:

The overall market staged a strong rally during the afternoon before profit taking in the last half hour of trading trimmed some of the gains. However, the overall market still put in a strong move higher in a broad based move that saw every index I track move higher with the exception of the Gold indices. The best performers on the day were the High Tech, Transports, Airlines, Financials, Cyclicals, Retailers, and Energy indices.

It looks like a big factor in the markets move higher was comments by Secretary Geithner that the Europeans would not let their banks fail. Unfortunately, I think the voters in Europe may not be thinking the same.