A Look at Friday’s Market: The overall market moved moderately higher Friday in a relatively broad based move that saw the majority of the various sector indices I track move higher as well. There was strength in the Banking, Chemicals, Consumer, Cyclicals, Healthcare, Financials, Retailers, and Commodity related indices. There was weakness in the High Tech, Transports, and Gold/Silver Indices. Oil was higher by $0.96 to $103.60 per barrel, and Gold was lower by $2.50 to $1,725.90 per ounce. In the grain markets, Wheat was higher by $0.152 to $6.44 per bushel, and Corn was higher by $0.054 to $6.416 per bushel, while Soybeans were higher by $0.092 to $12.674 per bushel.
A Look Ahead to Tuesday’s Market: In looking at the charts from Friday’s market, the vast majority of the stocks and various sector indices I looked at continue have upward chart patterns. This is obviously a busllish sign for the market. However, a point of concern is that the Dow Jones Transportation Average now has a negative chart pattern and appears to be headed lower. While the Dow Jones Transportation Average may reverse this trend and head back higher, my concerns are that the rising price of oil and other regulatory issues are going to put the earnings of the components under pressure and ultimately send the Dow Jones Transportation Average lower. However, if you believe in the Dow Theory, as I do, then if this downward trend in the Dow Transports continues, then this is a very ominous sign for the overall market.
At some point the general public is going to wake up and realize that the price of over is noticeably over $100 per barrel and it is hitting their pocket books; when that happens it will impact consumer spending and the economy.
The Bottom Line: A trend remains in place until it is broken, and the current trend is to the upside. However that doesn’t mean we can completely ignore the warning signs.