Market Commentary

A Look at Wednesday’s Market Activity: The overall market moved moderately lower in a broad based move that saw every sector index I track move lower as well. The weakest sectors were the Gold/Silver, High Tech, Banking, Broker/Dealer, Chemicals, Oil Services, Commodities, and Transports. In the commodities, Oil was lower by $2.24 to $86.29 and Gold was lower by $5.80 to $1,647 per ounce. In the grain market, Wheat was lower by $.056 to $6.194 per bushel, and Corn was lower by $0.054 to $6.384 per bushel, while Soybeans were lower by $0.256 to $12.25 per bushel.

A Few Thoughts Before the Open: In looking at the charts from yesterday’s trading activity I have the following thoughts and comments.

1. Trading volume continues to be light. This causes me concern over the strength of the rally.

2. Several of the sector indices I am looking at indicate that they could be in the process of breaking out to the upside.

3. This is option’s expiration week. As I have written about in the past, I have seen a common trend of the market reversing its previous trend during options expiration week, and then resuming its prior trend at the start of the new options month. I believe this is a result of …….

A Look at Monday’s Activity: The overall market moved sharply lower Monday in a broad based move that saw every sector index I track move lower on the day. The weakest sectors were the Banking, Oil Services, Cyclicals, High Tech, Insurance, Commodities, Broker/Dealers, and Transports. The Dow Jones Industrial Average was lower by 212 points. Among the Dow 30 the weakest stocks were Alcoa, Hewlett-Packard, 3M, and United Technologies. In the commodity sector, Oil was lower by $0.38 to $86.62 per barrel, and Gold was lower by $6.40 to $1,676.60 per ounce. In the grains, Wheat was higher by $0.014 to $6.242 per bushel, and Corn was higher by $0.004 to $6.404 per bushel, while Soybeans were lower by $0.17 to $12.53 per bushel.

A Few Thoughts Before the Open: In looking at the charts from Friday’s market activity I have the following thoughts and comments.

1. Volume was very light across the board. On an average morning I review the charts on approximately 40 indexes, all the stocks setting new yearly highs, and all stocks that traded more than 1 million shares the day before. In looking at the charts from Friday’s activity, I saw nothing that broke out to the upside that had a volume confirmation. That alone should be a warning bell for the upcoming market.

2. In looking at the Dow Jones Industrial Average it is interesting to note that Friday’s close appears to have been pretty much right on the 200 day moving average.

The overall market was rather dull yesterday. It reminds me of an old saying about never shorting a dull market. It looks like we may be seeing a rally in the high tech sector as many of the high tech indices put in good performances yesterday. However while it is very tempting to declare the start of a market rally, which may be the case; I continue to stand by convictions that we need to see a close above 11,613.53 on the Dow Jones Industrial Average in order to confirm a breakout from the sideways pattern we’ve been in since mid-August.

It’s been a few days since my last post as I’ve been out of the office on a few projects and just not available prior to the open. Since then the overall market has put in a strong rally. The Dow Jones Industrial Average has risen from a closing low of 10,655.30 to close at 11,518.85 yesterday for a gain of 863.55 points or approximately 8.1%. As of yesterday’s close, the Dow Jones Industrial Average is now down only 1.39% on the year. While my 1st Rule a Trend may be that a trend remains in place until it is broken; my 2nd Rule of Trends is that the longer a trend remains in place the greater the chance it will be broken……………..

n looking at the charts from Friday’s activity I have the following thoughts.

1. The pre-market futures are sharply higher this morning due to the news out of Europe that Germany and France have pledged to come to a solution for the European debt crisis within the next 2 weeks. This makes me nervous. They have not actually agreed upon a solution. Additionally deadlines to come to agreement typically produce bad agreements in my opinion. I have said it before, and I’ll say it again; Europe has deep structural problems with its entitlement system that are generational in nature and will take years, if not decades to fix, if at all……………….

A Look at Tuesday’s Market Activity: The overall market staged a very impressive rally in the last hour of the day with the Dow Jones Industrial Average rallying almost 300 point in 45 minutes. While it is not entirely clear what sparked this rally, the media is giving credit to comments from Europe about their realization that they need to protect their banks from failure. If this is the case, then I consider it be nothing more than than a case of computer driven momentum activity. I help edit the Sterling Reporter, and this so called news, was basically reported on very early in the morning by the UK newspapers. Unfortunately I think this volatility is pretty much the new normal, we are going to need to learn how to deal with this volatility and ride it out.

Oil was lower by $1.94 to $75.67 per barrel, and Gold was lower by $41.70 to $1,616.00 per ounce. In the grain markets, Wheat was lower by $0.154 to $6.04 per bushel, and Corn was lower by $0.046 to $5.876 per bushel, while Soybeans were lower by $0.174 to $11.60 per bushel.