The Trading Range Continues
The earnings season continues to bring in more bad news as each company shows signs of being hit by the credit crisis. Most recently GM has been under increasing fire and as I write this post, she is trading under $3.25 a share. The only positive note in all of this is the lowering gas prices as a result of the downturn in the economy.
The trading range we are experiencing in the Dow Jones is simply unbearable. This up and down action has been going on for over a month now and it appears that it will continue to do so for the foreseeable future. The October 10th low on the Dow is still holding up, but the lackluster action near the 9,800 level implies the market could attempt to retest the recent lows.
Dow Trading Range
The market is continuing to pullback from last week's high set on Wednesday, with fibonacci support coming in around the 8,600 - 8,500 level.
If this fibonacci level does not hold, we are in for a retest of the lows in the 8,200 - 7,800 zone.
With so much noise and wild swings in the market, let's get old school and take a look at the point and figure chart of the Dow Jones. This is always a favorite of mine when market volatility gets too extreme. Notice how the Dow is coming into major support at the 8,600 - 8,550 level. Look for some fireworks to take place in this key zone. If the bulls are able to hold this level, it should setup the next up wave; however, if she is unable to hold here, the bears will have their way.
JAFeild (not verified)
Which way the Dow and stock market indices
I wrote this comment at the end of my comments yesterdaay. "Also, this is very interesting. One indication of economic slowdown in China is their demand for cotton. China consumes approximately 50% of the annual production of cotton in the world. Check out what is happening to global cotton prices. Cotton at the ICE Exchange made a 5 1/2 year low today. The textile industry in China is the country's 2nd largest industry, and it certainly makes sense that if China is slowing down import of cotton to make socks, towels, shorts, pants, ... then it's likely because of a drop in consumer demand in that country." if demand of gas or crude oil is so bad that people can't even afford fuel for their cars, say, $1.90/gal, and more than 50% less than the price was only 3 months ago, then that ain't good. Just imagine how bad the Christmas shopping season is going to be. Mime is going to be horrible anyway, but don't have many presents to buy anyway, but point being if people can't even afford fuel to drive, say, not to work, because they will buy fuel for that, but not on weekend, then less shoppng and presents will be bought over the next month and a half. That doesn't spell well for any kind of retailer or e-tailer, ... That will probably mean more empty commercial retail leases, less income for the likes of CB Richard Ellis's and so on. OK, today's stock market activit was really bad. The market tried to rally early and early in the evening last night in the overnight trade, but it couldn't. What is that telilng us? Simple, that the market wants to head lower. Also, the chart of the Dow, S&P 500, and the E-Mini S&P 500 aren't oeversold by any means. I just don't think anyone is going to buy the market until it's really cheap, and according to the RSIs the market is a long ways from being cheap. So, let's add us what's going on. Expectation for the short-term, notably the holiday shopping season are dismal, global economies aren't doing good, namely China, key stock market indicies and the Dow Jones are in downtrends and not oversold, consumer confidence is on all time lows, basically ever credit industry home, car, and student loans need finanacial credit funding/support, and hey, the market is telling us that it wants to trade down. my recommendation is traders won't get in it way. We going lower to, in my opinion, new lower lows this week for the stock market and stock market indicies.