September 9th, 2011

A Look at Yesterday’s Activity: 

The overall market moved moderately lower yesterday in a broad based move that saw the majority of the sector indices I track move lower on the day.  The weakest sectors were the Broker/Dealers,  Banking, Cyclicals, Insurance,  Airlines, High Tech, Chemcials, and Pharmaceuticals.  The rest of the sector indices I track moved lower as well with the exception of the Gold/Silver index which posted a small gain on the day.

Oil was lower by $0.29 to $89.05 per barrel, and Gold was higher by $40.30 to $1,855.20 per ounce.  A friend of mine pointed out last night that every time the Bernanke speaks Gold rises by a minimum of $25 that day.  Wheat was lower by $0.134 to $7.38 per bushel, Corn was lower by $0.14 to $7.34 per bushel, and Soybeans were lower by $0.024 to $14.18 per bushel.

A Few Thoughts Before the Open: 

In looking at the charts from yesterday’s trading activities it looks as if the market is starting to encounter resistance to moving higher.  I think this week was somewhat in flux throughout the entire week due to the Labor Day weekend, the Republican Presidential Candidate debate, and President Obama’s speech last night.  Basically everyone was more or less waiting to see what was going to be said by all parties.

I think today will be the day where the market settles in for its fall movement.

As of right now,  I am seeing bearish chart patterns my oscillating indicators are starting to turn back lower, signalling another short term move lower.

If I am correct, and the market moves back lower and test new short term lows, then this will have been a very weak retracement of the market’s selloff. In the August 31st edition of our Market Commentary Blog I provided the expected levels of the Dow Jones Industrial Average on typical retracement.  I stated that we could expect to see the Dow Jones Industrial Average rally to somewhere between 11,381.63 on the low end and and 12,043.22 on the high side on a closing basis.  Well the Dow made it to 11,613.53 on a closing basis, about 230 points above the minimum expected rally point, and approximately 430 points from the upper end of a potential retracement rally.

In the past it has been more common for the retracement rallies to get a lot close to the upper end than the lower end.  While it is what it is.  My take is that it was a very weak retracement and a sign of a strong probability of futher downside movement.

The Bottom Line:  I am expecting the overall market to continue to move lower and the Dow Jones Industrial Average to test support at 10,719.94 in the next couple of weeks.

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