Market Commentary – August 19th, 2011

A Few Thoughts Following the Close:

The overall market again moved lower Friday in a broad based selloff that saw every index I track move lower on the day.  The Dow Jones Industrial Average closed down approximately 173 points at 10,817.65  This places the Dow Jones down approximately 1.5% year-to-date,  and the S&P 500 which finished the day at 1,192.76 is down over 5% year-to-date.  I continue to expect the Dow to settle into a trading range somewhere between 10,600 on the high side and 9,600 on the low side.

Corn was higher by $0.12 to $7.11 per bushel as concerns over the high heat in Iowa pushed down yield estimates.  Wheat was higher by $0.23 to $7.30 per bushel. Oil was lower by $0.10 to $82.41 per barrel, and Gold was higher by $30.20 to $1,850.10 per ounce.

A Few Thoughts Before the Open:

The overall market sold off sharply yesterday.  The sell-off is obviously the result of expectations of a double dip recession.  If this continues for much longer, then it runs the possibility of becoming a self-fulfilling prophecy.

In looking at the chart on the Dow Jones Industrial Average, I see a real strong possibility that the Dow could easily, and probably will drop into a trading range between approximately 10,600 and 10,000 with a chance the lower end of the trading range may be around 9,600.  I would also like to add a note of concern,  if we drop below 9,600 then we could be in for a pretty hard drop from there down to the 8,000 level. Let’s hope that doesn’t happen.

The other thing to worry about is that the decline in the market causes people to pullback on their economic activity and we fall into a second recession that is worst than the last one.  Then we really be in for a “Great Recession” to rival the Great Depression.

In looking at the various indices I track, I have the following comments.

Dow Jones Industrial Average:  The Dow Jones Industrials closed at 10,990.58  The Dow Jones Industrial Average appears to have resumed its move back lower. I am seeing upside resistance on the Dow Jones Industrial Average at 11,006.22 and downside support at 10,698.75 and then at 10,415.54 on a closing basis.

S&P 500 ‘SPX’:  The S&P 500 closed at 1,140.65 I see upside resistance on the S&P 500 at 1,225.85 and downside support at 1,127.79 on a closing basis.

NASDAQ 100 Index ‘NDX’:  The NASDAQ 100 closed at 2,073.03  I continue to see downside support on the NDX at 1,975.33  However,  upside resistance is somewhat in flux as the market recovers from an extreme sell off earlier this month.

The Dow Jones Transportation Average:  The Dow Transports closed at 4,299.55  I see upside resistance on the Dow Transports at 4,320.05 and downside support level  at 4,277.44 on a closing basis.

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