Market Commentary – July 12th, 2011

A Couple of Thoughts After the Close:

  1. Following a roller coaster of a day,  the Dow Jones Industrial Average finished the day just over 58 points lower to close at 12,446.88  It looks to me like the Dow is going to continue to move lower.  While there might be some support at its 40 day moving average, which is now at 12,331.29;  I think the Dow will most likely continue to move lower and test support at 11,934.58
  2. It looks like the Dow Jones Transportation Index has started a new downward trend.  The Dow Transports closed at 5,386.16  I think there is a good chance it will continue to move lower and test support at 5,060.59 on a closing basis.
  3. The Amex Airline Index ‘XAL’ closed at 41.58 and appears to be heading back lower.  I expect it continue to move lower and test its June closing low of 40.34
  4. The Philadelphia Semiconductor Index ‘SOX’ gapped lower on the open of trading today.  It finished the day at 394.96  It has broken its recent uptrend.  I expect it to continue to move lower and test 388.21 on a closing basis, and possibly 373.85

I really do not see any reason the market should be moving higher at this point in time.  I think the issues in Europe are not really improving, and they are actually getting worse.

Additionally,  I think the budget deficit situation here in the U.S. is a prime example of how the Democratic party has absolutely no concept of economics.  In his 1st election campaign,  Bill Clinton’s team had a slogan of “It’s the Economy, Stupid!”  Well,  the modern day Republican version should be “It is About Growing the Economy,  Stupid!”

I do not see any deficit deal being able to be worked out with the Democrats other than one that will hamstring the economic growth of this country;  basically one that would be suicidal for the Republicans to sign off on.  I think the Democrats feel they can force a default on August 2nd, blame it on the Republicans, and score big in the 2012 election.  Basically they are willing to play Russian Roulette with the economy of the United States in hopes of gaining an advantage in the next election.  Dick Durbin and the Democrats in Washington should be ashamed of themselves!  They are incompetent, short sighted, self serving fools who do not deserve to hold the offices they do

A Few Thoughts Ahead of the Open:

In looking at the charts from yesterday’s trading activity a few things stand out.

  1. The vast majority of the heavy volume stocks have negative chart patterns.
  2. All the various stock indices I look at appear to have started new downward trends.
  3. The Dow Jones Industrial Average closed approximately 3 points above its 9-day moving average.  If the Dow closes down today, then I think there is a strong possibility that we will see the Dow Jones Industrial Average continue to move lower and test its 40 day moving average which is currently at 12,325.36
  4. Looking for something to short today where I can write puts against the position.  Possible candidates include just about everything.

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