Market Commentary

A long time friend of mine, who is a stock broker I have a great deal of respect for, called yesterday and asked about the market. Our conversation focused on the Dow Jones Industrial Average which I consider to be the leader which all other sectors follow. Our discussion centered on downside support for the Dow. I stated that I saw support and 10,415.54 and then at 9,686.48 basically the post “Flash Crash” support levels. When asked what happens if we break support at 9,6848.48; I looked at the chart during the spring of 2009 and came up with the following support levels. I see some reasonably solid downside support in 8,700 range, a little bit at the 8,000 level; and then its a sharp drop to 6,600 on the Dow. Does this mean I think the Dow is definitely headed towards 6,600? No. But I do not see support with any real solidity until the 8,700 level on the Dow. Does this mean I think the Dow could go to 8,700? Yes, I think there is a good chance we could see 8,700 on the Dow Jones Industrial Average by the end of this year.

A Few Thoughts Before the Open: In looking at the charts from Friday’s market activity I did not see a single index or stock that I would consider buying. Everything has a negative pattern. My concern in looking at the charts is that it appears that the selloff, or market downturn, could accelerate and we could see a repeat of August; only this time to lower lows.

The Bottom Line: I’ve been saying that I felt the market was in a sideways pattern with a downside bias. While my 1st Rule of Trends is that a trend remains in place until it is broken. However my 2nd Rule is that the longer a trend remains in place, the greater the chance of it being broken. One or Two more down days and we could see a retesting of the August lows.

In looking at the charts from yesterday’s trading activity, despite the approximately 140 point move higher by the Dow Jones Industrial Average, I really did not see anything with a bullish chart pattern. There were only a very small handful of stocks setting new yearly highs, and none of them looked interesting. The very vast majority of the heavy volume stocks continue to have bearish chart patterns. Really, the only stocks that look to be moving higher are…………….

A Few Thoughts Before the Open: In looking at the charts from yesterday’s trading activity I have the following thoughts on this morning’s market.

1. I think the across the board selloff in commodities is potentially signalling a decline in the economy. If we see a continued decline in commodity prices then I think there is substantial increase in the probability that the U.S. economy will enter a recession within the next 6 months.

2. Having completed my look at the individual stocks I did not see any stock setting a new yearly high with an attractive chart pattern; and the stocks with the heaviest volume all had bearish chart patterns. Not a good sign if you are looking for a market rally.

3. In looking at the charts of the various indices, I noticed that the chart of the Dow Jones Transportation Average was far more bearish than that of

A Look at Tuesday’s Activity:  The overall market was sharply higher in a broad based move that saw basically every sector index I track move […]

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……………………………